So what does everyone think about it? Keep it or can it?
Would you take a lower tax rate (such as 20 vs 25%) and everyone give it up?
I wouldn't miss it myself. House is paid for, and condo interest isn't enough to make a difference in taxes for us. My motto was always to pay off debt, not look for a bigger deduction. Silly me. But I think outside the box, and am interested in what it means for the overall economy. And does it make sense for millionares to deduct the interest on their million dollar lakeside vacation homes?
Scholars have long argued that the mortgage deduction and other tax subsidies supporting housing, including a deduction for property taxes and tax exemptions for profits on home sales, are neither equitable nor economically efficient. Some say they've helped skew the economy's reliance on an industry that has little export potential and often encourages over-consumption.
I'd support getting rid of it, and most all other deductions too. This, of course, assumes a lower overall tax rate.
But you'd have to phase in removing the mortgage deduction. Too many depend on it to make their home payments. And if real estate isn't bad enough now, the market would once again crash if you immediately eliminated that deduction. And I'm not sure whatever lower tax rate you'd get (if any), would make up for the loss of that deduction.
First, I'd get rid of the mortgage deduction for a 2nd home, but phase it in over 5-10 years. And for the main home maybe phase it in over 10-20 years?
edited to add I just noticed your link. Still need to read it since it might of already addressed my issues.
pineinthegrass wrote: I'd support getting rid of it, and most all other deductions too. This, of course, assumes a lower overall tax rate.
But you'd have to phase in removing the mortgage deduction.
Good points, definitely agree with less deductions and lower rates.
And any change has to absolutely be "phased in" to allow people to adjust, since we all have planned our lives around the almighty governments Tax policy which controls what we do and how we plan.
I thought it was a well written article with good points for thought.
The hardest thing about changing tax policy is the adjustment in planning and thinking.
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After reading your link, it's not very specific about the details. But it does mention a 12% tax credit on mortgages, vs. what we have now. That seems like a pretty big tax increase for most, to me. The 15% bracket starts at about $8600 for single, and $17200 married. I'm assuming most homeowners who still have a mortgage make more than that, even after deductions. If so, that's a tax increase. And if you are in the 25% bracket (about $35K income single, $70K married), it would be a huge tax increase (double).
But again, phase it in and get rid of the deduction on a 2nd home first (didn't see that mentioned in the article).
Canada doesn't have a mortgage interst deduction, and it doesn't seem to affect their level of home ownership. I heard some speculation that if they got rid of it, home prices would fall a little to compensate.
Thomas Sowell: There are no solutions, just trade-offs.
LJ, don't you realize the mortgage deduction on jumbo home loans is mainly used by the rich? And just because a home is paid off doesn't mean the owner is rich, could just be frugal, paid any extra money torward the loan, and bought a small place.
Thomas Sowell: There are no solutions, just trade-offs.
