I don't think it's going anywhere. I may eat my words in a few years, but it's a very complex political issue and people are overwhelmingly in favor of keeping it in place. A lot of people are also in favor of a simplified tax code, but when you tell them it means they can't deduct their mortgage they change their mind (note - there are some smart folks who understand that it would balance out by lowering other taxes, but most people don't delve deep enough into the matter to hear anything other than "they're taking my deduction away!". The real estate lobby is very powerful in DC and for a politician to stand up and say they want to do away with it is political suicide.
Post by littlemisssunshine on Oct 15, 2012 13:08:28 GMT -5
I don't get the appeal of mortgage interest deduction....I will pay roughly 9600 in interest this year, and our tax rate last year was 12%. So it will save me roughly $1152. A nice chunk sure, but not enough to sway my decisions selling the house/worry about the tax deduction being taken away. We fully fund retirement, but still are paying down our mortgage aggressively, even at a 4.3%. Why would I want to continue paying 9k in interest a year to save $1152 in taxes?
I don't think it's going anywhere. I may eat my words in a few years, but it's a very complex political issue
I agree. I just can't imagine it successfully getting through the House and the Senate in anything resembling short order. It seems ripe for bipartisan bickering.
I don't get the appeal of mortgage interest deduction....I will pay roughly 9600 in interest this year, and our tax rate last year was 12%. So it will save me roughly $1152. A nice chunk sure, but not enough to sway my decisions selling the house/worry about the tax deduction being taken away. We fully fund retirement, but still are paying down our mortgage aggressively, even at a 4.3%. Why would I want to continue paying 9k in interest a year to save $1152 in taxes?
Well, you're paying that $9k in interest whether or not there is a mortgage interest tax deduction, so personally I'd rather pay a net of $7848 than $9000.
Now, if you're talking about whether or not to pay off your mortgage (in which case you'd have no deduction), then I agree with your point, but not if it's a question about whether the tax break lasts or not.
All of that said, I would be in favor of streamlining the tax code (as long as all deductions were eliminated, and not just cherry-picked based on who has the biggest lobby), but I do think it would have to be phased in over a fair amount of time to avoid sending us back into another serious recession.
I see deductions being phased out by income levels over time. As far as mortgage deductions go - with the current low interest rates, it is not many years of home ownership for many people to no longer exceed the standard deduction amount and thus "lose" the deduction..
If they eliminate the mortgage tax deduction we will be selling our house. We cannot afford it without the tax break.
While we can afford it, it would make no financial sense. At all. We would sell too. And the already shaking housing market would collapse. So no, I don't think they'll get rid of the mortgage deduction.
I'm not sure how short term you're thinking, but nothing will happen before the election. Congress is on recess and has been since the end of September. I think many people expect something to shake out on the Bush tax cuts post election because a non-phased expiration will have very serious economic consequences.
Post by formerlyak on Oct 15, 2012 15:12:53 GMT -5
The one I've been watching is the charitable contribution deduction, which is also up for discussion. If they eliminated that, it would have a big impact on a lot of things - hospitals, education, social services, food banks, etc.
Post by simpsongal on Oct 15, 2012 15:27:43 GMT -5
Ditto OPs about limiting and lowering deductions. If Congress ever gets it together I could see that happening regardless of who is living at 1600 Penn Ave.
A lot of people don't realize that the mortgage interest deduction already is limited to interest on $1 million worth of home debt. Realistically, I could see that limit dropping to be in line w/FHA loan limits or a generic number like $500K. But that's an uphill battle with the NAR lobby.
God help the State of NJ if the property tax deduction is capped.
I wonder how the lower rates are impacting deductions.
I doubt we'll be able to itemize this year. We refi'd last December and our rate is around 4%. Our mortgage balance is only around $108K now, too, and in the past, we've always been just barely over the standard deduction anyway. It will probably depend on whether or not our charitable contributions were more this year than in the past (which I don't believe they are).
I'm not too concerned though. I don't mind paying less in interest even if that means we can't deduct it. We have a pretty low effective tax rate as it is.
Ditto OPs about limiting and lowering deductions. If Congress ever gets it together I could see that happening regardless of who is living at 1600 Penn Ave.
A lot of people don't realize that the mortgage interest deduction already is limited to interest on $1 million worth of home debt. Realistically, I could see that limit dropping to be in line w/FHA loan limits or a generic number like $500K. But that's an uphill battle with the NAR lobby.
God help the State of NJ if the property tax deduction is capped.
We don't get any benefit on our federal taxes for the property (or personal property) tax we pay. State yes, federal no. Is that because it's phased out?
I agree that it's not going to happen, at least until the housing market substantially improves. Why on earth would they disincentivize home ownership at a time when we desperately need people to be coming out in droves to buy homes?
Post by milkrations on Oct 15, 2012 19:44:05 GMT -5
I don't think the mortgage interest credit is going away any time soon, but I don't think it is the boon to all homeowners it is made out to be. If you are married, your standard deduction is $10900 per year. So, in order to gain any benefit from the credit, you need to pay more than that in interest (or else you would take the standard deduction). Then, your tax savings is only the difference between the two numbers multiplied by your marginal tax rate. The poster up thread who mentioned paying $9600 in interest doesn't actually get any tax savings if she files MFJ. I bet there are a lot of mortgages with annual interest payments less than the standard deduction.
But, people who may not actually benefit from the deduction think they benefit (because they don't understand that the benefit only applies to interest paid over the standard deduction) from it and be up in arms about losing it.
I don't think the mortgage interest credit is going away any time soon, but I don't think it is the boon to all homeowners it is made out to be. If you are married, your standard deduction is $10900 per year. So, in order to gain any benefit from the credit, you need to pay more than that in interest (or else you would take the standard deduction). Then, your tax savings is only the difference between the two numbers multiplied by your marginal tax rate. The poster up thread who mentioned paying $9600 in interest doesn't actually get any tax savings if she files MFJ. I bet there are a lot of mortgages with annual interest payments less than the standard deduction.
But, people who may not actually benefit from the deduction think they benefit (because they don't understand that the benefit only applies to interest paid over the standard deduction) from it and be up in arms about losing it.
This of course assumes she has no other tax deductions which is very unlikely. If nothing else, property tax comes to mind..
. If you are married, your standard deduction is $10900 per year. So, in order to gain any benefit from the credit, you need to pay more than that in interest (or else you would take the standard deduction). .
I don't get that. There are plenty more itemized deductions than just mortgage interest. We pay less than the standard deduction in mortgage interest, and still benefit from itemizing.
. If you are married, your standard deduction is $10900 per year. So, in order to gain any benefit from the credit, you need to pay more than that in interest (or else you would take the standard deduction). .
I don't get that. There are plenty more itemized deductions than just mortgage interest. We pay less than the standard deduction in mortgage interest, and still benefit from itemizing.
Yes. We don't own property, but we itemize because our state + local taxes exceed the standard deduction.
Ditto OPs about limiting and lowering deductions. If Congress ever gets it together I could see that happening regardless of who is living at 1600 Penn Ave.
A lot of people don't realize that the mortgage interest deduction already is limited to interest on $1 million worth of home debt. Realistically, I could see that limit dropping to be in line w/FHA loan limits or a generic number like $500K. But that's an uphill battle with the NAR lobby.
God help the State of NJ if the property tax deduction is capped.
We don't get any benefit on our federal taxes for the property (or personal property) tax we pay. State yes, federal no. Is that because it's phased out?
Probably because of the AMT. Do you also lose your fed deduction for state taxes? I hate the AMT.
I don't think the mortgage interest credit is going away any time soon, but I don't think it is the boon to all homeowners it is made out to be. If you are married, your standard deduction is $10900 per year. So, in order to gain any benefit from the credit, you need to pay more than that in interest (or else you would take the standard deduction). Then, your tax savings is only the difference between the two numbers multiplied by your marginal tax rate. The poster up thread who mentioned paying $9600 in interest doesn't actually get any tax savings if she files MFJ. I bet there are a lot of mortgages with annual interest payments less than the standard deduction.
But, people who may not actually benefit from the deduction think they benefit (because they don't understand that the benefit only applies to interest paid over the standard deduction) from it and be up in arms about losing it.
Our state income tax alone gets us over the standard deduction.