Mortgage interest deduction on the table

[kludge]

In the grand scheme of things I don't see a problem with the mortgage interest deduction... follow me for a minute here...

I loan my money to the bank in the form of deposits. They loan it out (several times over) and make money on my money. They pay me interest. I pay taxes on the interest income. It's a business expense for the bank so they don't pay taxes on it (the portion I receive).

A bank loans out money as a mortgage. The person who they loaned it to pays interest on the money they borrowed. The bank pays taxes on the interest income, minus expenses (see the previous paragraph).

Somebody is always paying the tax on the interest, whether it's me on the interest of my money on deposit or the bank on the interest of money they loan out.

If the .gov makes me pay taxes on the mortgage interest I pay to the bank then the .gov is double dipping. Again.

It's like the inheritance tax.

 

[JettaKnight]

In the grand scheme of things I don't see a problem with the mortgage interest deduction... follow me for a minute here...

I loan my money to the bank in the form of deposits. They loan it out (several times over) and make money on my money. They pay me interest. I pay taxes on the interest income. It's a business expense for the bank so they don't pay taxes on it (the portion I receive).

A bank loans out money as a mortgage. The person who they loaned it to pays interest on the money they borrowed. The bank pays taxes on the interest income, minus expenses (see the previous paragraph).

Somebody is always paying the tax on the interest, whether it's me on the interest of my money on deposit or the bank on the interest of money they loan out.

If the .gov makes me pay taxes on the mortgage interest I pay to the bank then the .gov is double dipping. Again.

It's like the inheritance tax.

So the correct solution is not to have a specific deduction that inflates the values of a home artificially and complicates the tax system, but to not tax interest on loans.

So if this occurs - expect every millionaire to get into the loan shark business.

 

[femurphy77]

If a mortgage deduction is seen as simply keeping more of my own money, then what do you call it when I don't have a mortgage? A penalty? A tax? Same thing with the child tax credit. So I'm being penalized and taxed higher because I don't have a mortgage and only 1 child?

All these deductions are aimed at winning votes and influence.

FINALLY!!! Somebody said it.

 

[kludge]

So the correct solution is not to have a specific deduction that inflates the values of a home artificially and complicates the tax system, but to not tax interest on loans.

So this occur - expect every millionaire to get into the loan shark business.

I disagree that the interest deduction artificially inflates the values of homes.

Millionaires invest their money, who cares if they want to do it making high risk loans.

In fact, the reason we are where we are is that the .gov FORCED the banks to make loans to people that should never have had loans, then they made us pay for it (by bailing out the banks and devaluing our currency and wrecking our/my 401k and other investments).

The extra demand was what artificially inflated the home values.

Hint: Bush didn't do it.

 

[hornadylnl]

I disagree that the interest deduction artificially inflates the values of homes.

Millionaires invest their money, who cares if they want to do it making high risk loans.

In fact, the reason we are where we are is that the .gov FORCED the banks to make loans to people that should never have had loans, then they made us pay for it (by bailing out the banks and devaluing our currency and wrecking our/my 401k and other investments).

The extra demand was what artificially inflated the home values.

Hint: Bush didn't do it.

So those who defaulted on loans aren't responsible? I get high limit cards in the mail all the time. I guess I should get everyone I can and max them out. If I can't pay it back, it's the bank and government's fault.

 

[JettaKnight]

I disagree that the interest deduction artificially inflates the values of homes.

The value (or price) of homes is increased because homeowners can buy a more expensive house because of the benefit received for interest on the loan.

If a homeowner had to factor in the tax, it increases the cost of a given home. That makes home ownership less attractive.

A Tax Plan That Economists Love (And Politicians Hate) : Planet Money : NPR

EDIT: The other home price inflator (ignoring recent economic woes) is the 30 year mortgage. Would you want to loan out money for 30 years and only get back a couple of points over inflation? What if you make a loan for %5 and inflation goes up to 10%? You're screwed! Or, if the inflation rate falls, the loan will be refinanced and you won't ever be able to really make you investment shine.

Don't forget about the risk of default and being stuck with collateral you can't use or sell.

For a lender, a 30 year mortgage is a losing proposition - that's why the gov't has to get behind them to prop it up.

 

[kludge]

We'll just have to agree to disagree. The average person buying a house doesn't have that much forethought, or know how to calculate the deduction, and plans to blow the "refund" anyway on other stuff, and wouldn't be able to budget the refund forward.. It made ZERO difference to me. Besides my charitable contributions far exceed my mortgage interest deduction, but in that regard I'm probably in the minority.

Regardless, it's a deduction, not a credit, plus if I pay tax on my mortgage interest then the .gov is double dipping, cuz that's what the mortgage company pays it's taxes on.

The biggest factor by far (you hit on it) is the 30 year mortgage, which started with VA loans after WWII, AFAIK.