Posted on 09/04/2011 9:07:32 AM PDT by SmithL
Washington -- Ending tax breaks for oil, corporate jets and hedge fund managers is nearly every Democrat's favorite way to reduce the federal debt. But one of the biggest tax breaks of all is heavily skewed to wealthy residents of San Francisco, San Jose and California's other upscale coastal cities.
It's the mortgage interest deduction, and its benefits are heavily concentrated in a handful of pricey cities, none of which votes Republican.
As the new super committee of Congress sets about finding another $1.5 trillion in deficit reduction by Thanksgiving, tax breaks of all kinds, including the interest deduction, are getting new scrutiny. Beloved by the public and the real estate industry, the deduction will cost the government more than $1 trillion over the next decade.
But few homeowners, even those claiming the deduction, know how skewed it is by region and by income. For young, affluent San Franciscans, it is tailor-made.
Just three metro areas - greater New York, Los Angeles and San Francisco - receive more than 75 percent of the subsidy, according to a 2004 study by economists Todd Sinai and Joseph Gyourko. Mortgaged homeowners in the San Francisco and San Jose region receive $4.6 billion a year from a tax break for what are known as McMansions, according to a study this year by John Burns Real Estate Consulting in Irvine.
The tax break is available to anyone who borrows up to $1 million for a mortgage - including for a vacation home - or takes as much as $100,000 in a home equity loan.
(Excerpt) Read more at sfgate.com ...
“I can’t believe all the Freepers who go ballistic on “RINOS” yet when the Home Mort Deduction is up on the table for elimination, they’re squawking bloody murder.”
This is nothing. You should check out the Social Security threads!
I squawk bloody murder every time FedGov™ raises taxes. The interest deduction is a good thing. Dont’t give an inch on taxes.
Man you must have one nice crib. Can you post a picture?
“The interest deduction is a good thing.”
No its not.
“The FED had deemed that “homeownership is good, therefore, we will subsidize one class of people over another.””
The Fed? The Fed has nothing to do with setting housing policy. That’s a political decision coming out of Congress and the executive branch.
The home-ownership-for-all goal was promoted by both Clinton and Dubya- try googling the “American Dream Downpayment Initiative” and see who made a speech to HUD praising Fannie and Freddy and “free” downpayments for select minority home buyers. His initials are GWB.
I haven’t seen anyone here identify one of the major culprits in igniting the housing boom- in the late part of the Clinton regime a law was passed exempting from tax $250k from the sale of a house- $500k for a couple. No other asset class gets an exemption like this. It was a huge magnet attracting investment money into housing.
Soon after this law was passed the NASDAQ bubble popped. People were soured on stocks, and here you had housing with this wonderful tax exemption. Not to mention the usual mortgage interest deduction. In California in particular, the land of the jumbo home loan, housing prices rapidly were bid up to the exemption limits as flippers piled in.
But other than that I’m pretty much in agreement with you. Tax preferences distort the real estate market. It encouraged people to buy for tax reasons when renting would have been a better option. It also makes real estate more expensive. And AFAIK that $250k exemption is still the law.
No income tax is a good thing. I want to keep as much of my money as possible. You can label it anything you want. A tax is a tax is a tax.
-—”The Fed? The Fed has nothing to do with setting housing policy. That’s a political decision coming out of Congress and the executive branch.”
I was referring to the Federal Gov’t (Congress + WH + Supreme Court) as they are the ones who influence IRS tax policy (e.g. mort ded).
You thought I meant the Federal Reserve Board?
Of course not.
It’s unfortunate that even here on FR people are more than willing to eliminate any tax deduction as long as it doesn’t affect them personally.
Eliminating this deduction will adversely affect the real estate market. It’s already depressed and it will get knocked down another 10 to 20%
What more can this administration do to destroy our economy? Oh, I forgot, force the banks to write more loans for people with bad credit. The very thing that got us into trouble they’re forcing on the banks again. There is no end to this lunacy.
The behavior is out there because the symbiosis of mutual greed makes bad the norm.
Unfortunately people don’t mind taxes as long as the other guy pays them. The only fair way forward is either the flat or fair tax. But I am sick to death of paying 6 figures in federal tax and listening to those who pay no tax tell me I’m not paying my fair share.
Yes there is a lower limit our accountant informed us that if you pay less than $4000 a year in mortgage interest you can not take the deduction.I also have a letter from the government about the changes we received when it happen dusting that if you have less than $4000 in mortgage deduction you can not take the deduction.
Yes there is a lower limit our accountant informed us that if you pay less than $4000 a year in mortgage interest you can not take the deduction.I also have a letter from the government about the changes we received when it happen dusting that if you have less than $4000 in mortgage interest you can not take the deduction.
You pay $4000 a month in interest on your loan? YIKES we don’t pay that in a year.
It would help if you could deduct like it was pre change where no matter the interest you paid it was deductible.It is now by law you have to pay at least $4000 a year that means if your home is a moderate one and under $50K you can not take the deduction.
Well last year on the home we own on we paid almost $3000 a year in interest.We bought it repo’ed and gave $28 for the house with an additional $12 to remodel it.It is a 2 story turn of the century in a historical neighborhood.Our home we live in has been paid for for 26 years and we also own a 7.55 acre piece of land.
If all they do is get rid of the deduction without any reduction in overall tax rates they will simply be pulling more money out of the private sector and our economic condition will get worse. Government consuming nearly a quarter of GDP is deadly.
I agree.
It is immoral that someone can vote to steal through the cover of government from someone else.
No one should have the right to vote for a tax they do not pay themselves.
I’m going to have to check on that minimum amount. I just read all I could quickly find on the IRS website and I don’t see any mention of a minimum amount of int. required to take the deduction. They even give an example of people who paid under $2k in interest.
Now this all applies to a straight home mtg, not a home equity credit line or anything like that.
Sorry. In the words of the late lamented Emily Letilla, “nevermind”.
I’m used to seeing the Creature from Jekyll Island crowd blame the Federal Reserve for every conceivable financial problem and I assumed that’s what you meant by the FED.
Btw, are you in an alternative minimum tax (AMT) situation? That might change things also.
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