It's also questionable whether a tax policy that incentivizes debt is something that is in the best interest of society.

I have never in my life thought it was a good idea to spend thirty years paying for a house - it's a place to live, for godssake. By the time you pay interest on a mortgage for that long, you've tripled the price. Yet most people consider this to be absolutely normal.

My dad waited until he could afford a house to get married and buy one. He paid cash for the house my parents still live in and taught me not to buy anything I couldn't afford. I did buy a car on the interest system but paid almost 50 percent more a month than the amount I was supposed to pay and paid it off much faster (building my credit and showing I'm good risk, I think).

I also pay for almost everything with a credit card and pay it off in full every month. This makes things easier to track and much easier at tax time because of it. (I just search the phone company name out, etc.)

Pirate Jo, you just made the case for the mortgage interest deduction.

Excuse me, but you're being irrational, attacking the method of payment. That's up to the consumer: you.

Now, think of this: a nation of renters. What does that produce, especially in a social environment where blame-others and not-mine is prevalent?

You think a mortgage deduction is a bad idea? How about being dependent on the wording of a lease your whole life?

I have news: people pay their mortgages off. The interest rate now is at an all-time low. Maybe the time to complain about this is when housing cost 13%, not three.

Also remember this: every measure enacted as a result of wealth envy results in it being tougher to amass wealth. Before you think about "wealth" as Scrooge McDuck or Donald Trump, you better think about trying to keep your own $$ to pay for medical expenses as you age, and for the basics, at least, when you can no longer work.

Most middle income couples with a reasonable mortgage payment, gain almost no advantage tax wise from it.

This was not true, many years ago, before the tax code had a standard deduction, which was enacted to be more fair to renters.

My husband and I , with income under 150k and a 15 year note for 130k would have lost money by itemizing, and claiming the mortgage interest deduction, every single year we have done out taxes. The standard deduction was more than our itemized expenses,

The mortgage interest deduction is only useful to high income couples, usually with second homes, and people who think it is useful, but actually are just bad at math or really overextended financially.

The national debt isn't rising because of the mortgage deduction. The national debt is rising because of fucking out of control politicians and the fucking assholes who want bigger government. People with a mortgage pay taxes.

you better think about trying to keep your own $$ to pay for medical expenses as you age

Geez Radwaste, haven't you heard? Health care is gonna be free now.

People without a mortgage pay taxes, too.

One thing I appreciate about your opinion, Amy, is that it's consistent, even though I frequently disagree. I can't even count the number of people who want to see an end to things like welfare and food stamps but would flip their shit if someone touched their tax deduction.

As for the value of buying a house: It should, first and foremost, be a lifestyle choice. My husband and I are buying a house this year, and while we hope it will appreciate in value, we're doing it because we want lots of space and the ability to make decisions on design and build. We want to know our neighbors, too. I've rarely known anyone in the apartment buildings I've lived in because people come and go so quickly. We're buying less house than we can afford so we're not just meeting expenses.

Wow, here's an eye-opener:

You really think your landlord doesn't get the deduction?

What do you think happens to your rent if that goes away?

Causticf: "The national debt isn't rising because of the mortgage deduction. The national debt is rising because of fucking out of control politicians and the fucking assholes who want bigger government."

Thank you for pointing that out.

The national debt doesn't get bigger because there are things government doesn't tax. It gets bigger because the government spends too much money and borrows to buy things it shouldn't buy.

Amy Alkon: "My dad waited until he could afford a house to get married and buy one. He paid cash for the house my parents still live in and taught me not to buy anything I couldn't afford."

That's exactly what the government does not do.

If not taxing mortgage interest is unfair to people who don't have mortgages, then...

...not taxing contributions to IRA's and 401K's is unfair to people who don't contribute to them...

...and not taxing the value of employer provided medical insurance is unfair to people who don't have employer provided medical insurance...

...and not taxing something bought over the internet from Amazon is unfair to people who didn't buy it over the internet from Amazon.

When someone takes a tax deduction it doesn't mean the government is giving them some of your money. It means the government is taking less of theirs.

Getting the government to take more from other people is certainly a lot easier than getting it to take less from you. But it still wouldn't be fair. It would be more unfair.

Fairness shouldn't mean that everyone should get screwed because you're getting screwed. Fairness should mean making what's wrong right.

The fair solution to the government screwing you more than it's screwing other people isn't to get the government to screw the other people more, it's to get the government to screw you less.

I'd really appreciate it if people weren't stupidly smug about how they "own" their house when what they really have is a giant mortgage.

And I'd really, REALLY appreciate it if the marrieds, the kid factories, and the mortgaged-to-the-hilts would stop picking my pocket to support their indebted lifestyles.

I have used the home mortgage deduction for 14 years. My income is under $70K. The deduction has been a life saver for me. As a single person with no dependents I would be screwed by taxes.

The mortgage deduction helps a lot more people than the high income earners

How dare you, Amy. How dare you.

and be allowed to cause the national debt to rise.

I don't necessarily disagree with either the mortgage interest deduction, or talking about abolishing it.

But it's a complicated change, with a lot of multiple-order changes.

But that's got to be the worst attempt at a rationale that I've ever heard.

I mean, c'mon, let's discuss the whys and whynots - but let's be serious. We've not spent less than we've taken in since before the Second World War. (Promising to pay later counts.)

As to the total tax footprint, again, that's arguable as to whether the deduction increases or decreases total revenue.

But it's a lot more complicated than "adding to the debt"..

What fucking subsidy are we expecting? It's my fucking money being sucked away by the government. So what you are telling me is that you deserve my money? I have a consistent viewpoint as well. It happens to be that the least amount of my money should go to taxes and an undeserving government that can't seem to curb out of control spending. To do that, I take advantage of a deduction written into law. You want that changed, Amy? Do something other than complain in your blog. Get out there and run for office or start an actual movement to take away the deductions and, I would hope, reduce spending. I am amazed by the idea that you deserve my money. I could give a fuck that you have decided to have a career that pays little and live in a state that is above your means to buy a home.

I will echo MonicaP and say kudos on you being consistent. And I agree most of the deductions and frankly most of the taxes should be gotten rid of. Should have never been started in the first place. But it's easy politically to add deductions, hard or impossible to get rid of them. However, with rates being so low the deduction for many is less than it's been in decades, so if there is a time to axe it now could be the time. I doubt it would happen.
I would suggest though to phase it out over a few years, because many bought figuring it into their houshold expenses.

"I have used the home mortgage deduction for 14 years. My income is under $70K. The deduction has been a life saver for me. As a single person with no dependents I would be screwed by taxes.

The mortgage deduction helps a lot more people than the high income earners"

As someone who has done literally hundreds of tax returns, some of them both ways, I doubt this. At most, if you are making the income you say you are, your marginal tax rate, would be less than 25 percent.

This means that at most you will probably only save 20 percent of the money you spend on interest and the interest only starts counting as a deduction when you exceed your standard deduction. Your standard deduction as a single taxpayer was $5950 for 2012. This means that your deductions only start counting after you exceed that 5950 threshold.

If your interest and taxes are 1200 a month, which I would consider reasonable for someone making what you make, this means that you have a total of 14,500 in deductions for the year. Subtract out your standard deduction that leaves you with 8500 in deductions you can count. 20 percent of 8500 yields a tax savings of 1700 dollars because of your mortgage. I don't consider 140 bucks a month a lot of money.

Putting the money you are spending on interest into a tax deferred 401k and taking the standard deduction will save you way more in taxes than the mortgage interest deduction.

"Wow, here's an eye-opener:

You really think your landlord doesn't get the deduction?

What do you think happens to your rent if that goes away?"

The landlord doesn't take a mortgage interest deduction. What he gets to do is write off all the the legitimate expenses of property ownership such as taxes, mortgage interest, repairs and rental expenses against what the tenant pays in rent. He then pays taxes on what he nets out of the rental as income to him.

So the answer as to what happens to your rent if the mortgage interest goes away for homeowners is...absolutely nothing.

I wouldn't like to lose this deduction. At the same time I don't want the federal government to get a single dime more of my money or yours until they realize that taking more of my money is being done for a constitutional reason.

Taking more of my money to support a fucking Obamaphone just pisses me off. Show me where welfare (as in financial support) is in the constitution?

"Oh, but back to the "fucks" given: I do give many fucks that you get other taxpayers' money. You no more deserve it than GM, Bank of America, or Solyndra."

See that's the thing, it isn't other peoples's money....it's mine. Not yours. Mine. I earned it. Yes, It happened to be in an industry that didn't tank. Is that the new criterion? You deserve my money because you didn't know the newspaper business was going down the tubes? Wow, you seem to have an entitlement attitude. I could care less about the deduction in the long run. It isn't why I bought my house or why I can afford to buy my house. I don't need the deduction but it happens to be there so I will take it. I am not taking other taxpayer's money. The government is just taking less of mine but you see it differently. I owe it to you because your syndication business went awol. Let me know where to send the check since you are now entitled.

The government does not subsidize you, me, or anyone with a tax deduction. The government subsidizes people and businesses with Tax Credits. The difference is a payout. Example: The child tax credit is payed out even if the person claiming it pays no taxes. The mortgage tax deduction goes to 0 if you pay no taxes.

Pirate, by the time you pay rent 30 years, you've made your landlords mortgage payment and paid off his place (or made the apartment company's profits...). Buying isn't for all, mobility can be a perk worth paying $ and never owning anything, but the price factor is pretty silly. If we took our 30 years to pay it off, we would pay $300k for our 150K house. Houses smaller than ours in this neighborhood rent out for more than our mortgage and escrow. So if we rented something similar but smaller, for 30 years-assuming no rent increases-we'd pay almost $470k.

We are paying biweekly and will be paid off in 21 years, paying a lot less in interest. For us it is a no-brainder. DH's job is stable.

Ditto the "others pay for this" nonsense. Taking less of my money isn't taking more of yours.

$140 a month is a lot for many, Isab. Me included. And-to-repeat-the fact that I don't pay that $140 a month doesn't mean you have to pay it for me.

"And thanks, MonicaP, I'm consistent."

Those of you who believe this might want to revisit Amy's position on drug policy, where it is apparently lacking in consumer protection AND paths forward to legitimacy; individuals will apparently behave responsibly in drug use even as she chronicles the rarity of said responsibility in every second article. At least the difference between police misconduct and lawbreaking has been worked out - a little.

You may find some citations about this if you search for the term, "consistency alert".

This is not condemnatory, given the wide range of subjects here and the age of the blog.

$140 a month is a lot for many, Isab. Me included. And-to-repeat-the fact that I don't pay that $140 a month doesn't mean you have to pay it for me.

yes, but the point Mom of 4, in case you missed the math, was that you had to spend 14,500 dollars on interest and taxes to get that 1700 reduction on your federal income tax bill and that small amount is dwarfed by both your FiCA and Medicare tax bill.

I don't know about you, but if I promise to give someone 15k so the government can rebate me back 1700, and that was my primary reason for buying a house, I would have been had.

Might have done it,when there was no standard deduction and did, but now I have a very small mortgage, for a very short term, with a very large( non tax deductible ) principle payment.

The National Association of Realtors has been blowing smoke up everyone's ass for years now about how you "save big on income taxes" when you buy a house, and the only thing it has actually done was inflate the housing bubble at the expense of the prudent, who won't buy more house than they can afford, and the NAR profited with fatter commissions on those inflated sales.

http://m.youtube.com/#/watch?v=zcTjhXSmnmc&desktop_uri=%2Fwatch%3Fv%3DzcTjhXSmnmc

"yes, but the point Mom of 4, in case you missed the math, was that you had to spend 14,500 dollars on interest and taxes to get that 1700 reduction on your federal income tax bill and that small amount is dwarfed by both your FiCA and Medicare tax bill.

I don't know about you, but if I promise to give someone 15k so the government can rebate me back 1700, and that was my primary reason for buying a house, I would have been had."

Here's my take. The deduction wasn't the primary reason for buying the house. The primary reason for buying the house was...wait for it... the house.

That's it. They wanted to have a house and felt like leasing a place to live was throwing money down the rat hole. Hey, you want to rent? No skin off my nose but I prefer to buy. Guess what? there happens to be a mortgage deduction which I will take advantage of but don't tell me I am stealing from you.

You don't have some special need for my tax money. Especially when you purposely reduce your own income for your desire to live your life on your own terms. Of course, you already know that but just can't quite keep up that consistency you are so proud of.

Well Causticf, you quoted me, and I stand by exactly what I said, however, if you go back and read my posts, nowhere do I claim that someone taking the mortgage interest deduction is "stealing from me"

My position is that a lot of people have an emotional attachment to the mortgage interest deduction when it actually benefits them very little, or not at all, but they have been brainwashed into thinking otherwise, by the rent seekers who have benefited from it.

If you want to buy a house, fine by me, just don't expect the rest of us to bail you out when you get one of those creative zero down mortgages, with the balloon payment because the fucking realtor told you that you would get all that interest back as a "tax deduction".

"If you want to buy a house, fine by me, just don't expect the rest of us to bail you out when you get one of those creative zero down mortgages, with the balloon payment because the fucking realtor told you that you would get all that interest back as a "tax deduction"."

Don't worry, Sunny Jim. My mortgage was a 20% down fixed rate. I don't think most people have the emotional attachment you refer to on the mortgage deduction. I think most people are like me. They bought a house because that is what responsible people who have the means do. They don't want to throw money away for their whole lives like Amy does. Yeah, I could rent for the rest of my life and have nothing. I chose to go another route. I also choose to do it in an area where it is affordable.

I could move to Venice or San Francisco (where I lived in a previous incarnation) or some other area where home prices are ridiculous but as Amy said "There's more to life than strict financial exchanges."

And here's something further, I don't care how many hours you work for your preferred issues, Amy. If you want to change things that are in the government domain, you have to play in that domain or just bitch and throw out your snarky comments. It won't do anything but make you feel better but whatever.

"No -- and you don't deserve to have money tacked on to the national debt because you spent your money on whatever you spent it on instead of being able to pay cash for a house."

I don't tack money on to the National Debt. I'm one of those folks who actually pay federal taxes and the folks who have my mortgage ain't got no complaints. I pay my mortgage every month ( just like you with you rent) except I get to keep my house at the end of the contract which happens to be between me and the Bank. I guess I missed that part of your blog where Big Gov deserves my money to help that debt thing but I guess its good to see where you really come from.

"Apparently, unlike me, you're all for unfair as long as you're the one benefiting."

No, Sweetheart,I'm not.I just don't see it as unfair. You could buy a house and use the deduction or not. Again, the deduction means nothing to me. I take it because it available but, if it wasn't, I would still have bought my house. Unfair doesn't mean much to me since I am not 5 years old. I don't expect fair but, gee, I have a weak argument so by all means lets make things fair.

Unlike you, I understand that things aren't fair and, if you want to change them, you gotta get dirty in the political playground. Or you can just bitch. You are a pro at that.

Not that I'd shed a tear if the mortgage deduction went away, I'm still having a bit of an issue seeing how it somehow manages to steal money from other people.

I bought my house (75% down, and the rest in mortgage, would have bought outright, but wanted the particular property I found sooner than I expected to).

And, yes, I take the deduction, because it's there, and only an idiot would refuse to do so.

If I take the deduction, I give Uncle Sam about $21,000 a year in taxes, if I don't, it's about $22,000.

This is not, in any fashion, stealing money or depriving someone of something.

In the end, I'm simply not paying quite as much of my salary in taxes as I otherwise might.

You're not going to convince me that this is wrong, no matter how hard you try.

And, how is it that I, legitimately paying less in taxes, am driving up the national debt?

I'm not in charge of spending.

I'm not the one passing legislation for useless TSA operations or Obamacare (and so on).

This is a classic falsehood. The idea that you're somehow losing out if I'm not paying more.

You usually espouse a libertarian (ish) viewpoint.

While I can (sort of) see the argument for getting rid of the mortgage interest deduction (and don't really have an issue with that), I'm kind of missing the logic behind the idea that people should pay *more* in taxes.

Oh Tim, don't you understand the evil that is a mortgage. Amy's Father paid cash for his home so must you and forgo the horror that is the mortgage deduction.

"that's what we call unfair. The "Some people are more equal than others" treatment."

For Fuck's sake. There is nothing unequal about this. Buy a fucking house with a mortgage and you can use this deduction.

You have chosen to rent. YOU HAVE CHOSEN TO RENT! You could move from California and continue to do your work exactly the same way you do it now and easily find a place more suited to your financial capability. You don't want to do that because you like the weather and the people you surround yourself with. Perfectly understandable. Quit telling me your choices make mine unfair. I don't give a fuck about unfair.

"and also that you seem to be kind of a sour asshole"

I am kind of a sour asshole because I expect people to grow up and understand that fairness is a concept for little kids and has nothing to do wih the real world.

I would love to see what would happen if this was in reverse. After all it is mostly home owner's that are at fault for the situation we are in now. I say there should be a politician crazy enough to do this for shits:

"When Home Owners Result in Excessiveness" bill (WHORE for short). We should impose a 20% house tax to cover the next bailout due to buyer's carelessly getting loans. I have yet to see renters causing financial collapses.

-- Or --
We could simply tax people equally. Remember for you to get a deduction, the rest of us have to pay more; your deduction is not deducted from thin air it is taken from the tax that I paid and if that was not enough the tax will increase.

Amy, there is financial help available to you. Many times you've said "I could qualify for such and such but don't take it because its against my principles". Don't blame anyone else if you decide not to take it! That's your choice!

We could simply tax people equally. Remember for you to get a deduction, the rest of us have to pay more; your deduction is not deducted from thin air it is taken from the tax that I paid and if that was not enough the tax will increase. -- NakkiNyan at May 5, 2013 1:42 AM

Let's also take away the deduction for health care expenses and the MSA/HSA accounts (which are pre-tax). I didn't use them last year, so it is unfair that you get them and I don't.

Let's take off the deductions for business expenses. I didn't get them last year and so no one else should.

How about deductions for education. It's not fair that I didn't do any classes last year.

The tax code is so fucked up because of all the business and social engineering that has been done over the years. Do you remember the wooden arrow tax break in the 2008 bailout bill?

The mortgage interest deduction was not specifically created. It is a leftover from when you could deduct all interest[1]. I frankly would like to see the Sixteenth Amendment repealed.

Since that isn't likely to happen, I'd like to see the the tax code thrown out and the it be simplified to you 17% on earned income and 10% on dividend income. It kicks in for any income over the poverty level.

[1] -- taxfoundation.org/blog/history-mortgage-interest-deduction

Amy, there is financial help available to you.

No, there isn't, first of all. What I said is that I could have gotten one of those crazy loans but they looked to me exactly like what they were -- crazy, stupid, etc.

And secondly, I'm working on things.

We could simply tax people equally. Remember for you to get a deduction, the rest of us have to pay more; your deduction is not deducted from thin air it is taken from the tax that I paid and if that was not enough the tax will increase.

Yes.

JimP : I don't think that there should be deductions. If someone spent the money they should have to pay for all of it, including interest. As for healthcare and retirement, that should never have gotten mixed up into taxes to start with. I agree with the above-poverty-line flat-tax. IRS would be smaller and save federal funds in the process. Should be the same for companies too, they calculate their profits and tax that at a given percent without deductions.

The tax code is so fucked up because of all the business and social engineering that has been done over the years.

Yep. Rather than focusing on the home mortgage deduction here, the underlying issue is the complexity of the tax code. Why is the home mortgage deduction any more egregious than any other engineered tax benefit?

The reason we own a house is so that we have the freedom to alter it as we like and not have to worry that we will have to move unexpectedly. We're moving and our new home is being purchased under a 15 year, fixed 2.75 rate mortgage. It's hard to imagine a rental situation that could compete with current giveaway interest rates.

If you can't make it in business, you need to go into another business, not go into the pockets of the rest of us.

Yes, but it's odd to see someone with libertarian views characterize a failure to tax as money taken from the pockets of others.

>>Remember for you to get a deduction, the rest of us have to pay more; your deduction is not deducted from thin air it is taken from the tax that I paid and if that was not enough the tax will increase.

Completely wrong. If I get a deduction for any reason, it is taken out of tax dollars that I and I alone pay. If I pay less tax, it does not make you or anyone else pay more.

A tax deduction is not a subsidy; The government is simply stealing less from some than it steals from others. The goal should not be to increase the amount the government steals from some, it should be to decrease the amount it steals from the others.

"I expect people to grow up and understand that fairness is a concept for little kids and has nothing to do wih the real world. "

Apparently the law, the Constitution, and the social interaction of lower primates accept that the wisdom of little kids is the way to live.

Amy's right. You mortgage-laden buffoons are clinging desperately to your gummint gimmes. You, in particular, sound scared out of your waterproof panties that you're going to lose your handout - which proves that, regardless of your high wisdom in choosing an industry that hasn't gone down the tubes, you STILL don't have enough money to purchase your own home without government welfare.

"Um, I'm kind of busy working 5 am to about 8pm every day on my book, radio show and column..."

Sheesh, if you went out and got a regular job that paid, say only $25 an hour, and worked those kinds of hours five days a week... you'd be earning in the neighborhood of $110,000 a year, and paying taxes commensurate with that. So, if you're earning less than that doing what you love, you're paying less taxes than you could be, adding to the national debt and forcing the rest of us to pay more and subsidize your book, columns and radio show.

I suppose if I quit my job and started doing something that I like more that pays less, and thus paid less taxes than I do now, I'd be adding to the national debt and stealing from you.

I think I'm beginning to understand your logic.

I have to confess, I only work four days a week and pay less taxes than I would be if I worked five, so not only are you all working more than me, you're being forced to pay more to subsidize my extra day off.

Maybe it would be more f-a-i-i-i-r-r-r if our taxes were based on the amount we could earn instead of on the amount we actually do earn.

Actually, I agree with Chris: "The government is simply stealing less from some than it steals from others. The goal should not be to increase the amount the government steals from some, it should be to decrease the amount it steals from the others."

My father paid cash for our house too. On top of that, he built it himself with help from his friends and a few subcontractors.

This is to be admired, but is unrealistic for most people today.
Now days, I admire people who put at least 20 percent down, and have no more than a 15 year loan.

These people are going to find that the mortgage interest deduction has very little impact on their federal taxes.

My beef with the tax code, is that it has been twisted to almost always favor the irresponsible, and over extended at the expense of the prudent and productive.

The tax code is so larded up with goodies to subsidize rent seeking special interests, that fairness, in any real sense does not exist, and sadly,it probably never did.

The sad truth is that owning a home, has not kept up with inflation over the long haul in this country. and the mandatory real estate taxes, make homeownership a very poor investment over the long haul.

Many home owners are in worse shape than renters. They just don't realize it because they can't do the math.

I'm with Gog.

I also think the government should spend a lot less and tax everyone a lot less. But I hate this picking and choosing nonsense, where it doles out little deductions to people who do what the government seems to want them to do.

Because let's be clear about this. The government isn't giving you a kickback for buying a house, it's giving you a kickback for GOING INTO DEBT to buy a house. Otherwise why not give mortgage deductions for the principal payments? People who pay cash for their houses don't get the deduction, and if you are smart enough to buy a house you can afford to begin with, the interest won't amount to enough of a deduction for you to even itemize.

Ditto for all the little bribes for having kids, being a first-time home buyer.

And playing favorites has everyone doing just what the government wants - it has all of you fighting over who gets what, instead of fighting the government itself.

Like a bunch of dogs - some of the dogs resent the other dogs who do silly tricks to get more treats - resent the master who plays favorites and treats us like dogs in the first place.

Once again: A tax deduction is not a "gimme". If I choose not to steal your car on a given day, I have not given you a car.

Instead of advocating the end of tax deductions for homeowners, why not advocate the addition of tax deductions for renters instead?

When I hear "Did you know that [insert rich person here] only paid 8% in taxes last year??" my first thought is not "Awful! We should make him pay more!", but instead "Great! Now how can get everyone else to that level?"

"Instead of advocating the end of tax deductions for homeowners, why not advocate the addition of tax deductions for renters instead?"

Renters do get a tax deduction. It is called the standard deduction.
What the government essentially did, was to compute the average itemized deductions that people were claiming on their federal taxes, and gave it to EVERYONE.
in order to get any additional deductions above the amount of the standard deduction, you must clear the standard deduction threshold first.
The standard deduction was created because the tax code favored people who could itemize their mortgage interest and renters could not.

So what you are asking for, has already been done.

First, using income as a measure of wealth is wrong. There are retirees who have lots of wealth but very little income (all that money stashed away in your various IRA, savings, 401k and pension plans (although not for long on that last one) are wealth, but only what you take out counts toward income (and not from some of those accounts).

That said, it is also wrong because we have vastly different costs of living across the country. I remember living in St. Louis and thinking I'd live like a king if we made 30k a year. In the DC area, it was hard to scrape by (before kids) on 50k a year (same timeframe as St. Louis).

ALL that being said, it is a subsidization of housing in more expensive places... and it does prop up prices. It is MUCH cheaper for us since we can deduct our interest... or it was until interest rates got so low, not it's only a small difference.

As with college subsidies, I think it should be gotten rid of, but there will be a certain amount of system shock if it's wiped out in one swoop. While it is (sort of) already capped by the AMT, I would be most in favor of limiting the deduction and slowly reducing the size of the limit each year until it was gone. For what it's worth, I support the same idea w/respect to college subsidies.

Income tax is just evil.

Witness the awesomeness of making billions and never having to pay income tax again.

http://us.cnn.com/2013/04/09/opinion/mccaffery-zuckerberg-taxes?iref=obnetwork

It's worth repeating - tax wealth, not income.

Agree with Gog.

Relatedly, I don't care if the mortgage interest deduction goes away (and it probably should, just like all other tax incentives, and the entire system replaced by something rational).

But ... As long as it *is* available, I don't have any kind of an ethical issue with taking it.

It is not, in any way, illegal or unethical to avail myself of any (and every) legal mechanism available that allows me to reduce the amount of money collected from me by the government.

I didn't buy my house to get the interest deduction (it wasn't even on the fucking radar).

And, given that the amount financed was relatively small, the deduction isn't exactly causing my pocket to explode with dollar bills.

Like Astra said, I bought my house so that I have minimal restrictions on what I do with it.

If I rented, I may not be able to plant my vegetable garden, or landscape the front yard.

I may not be able to make repairs with the quality *I* choose, rather than cheaping out with a landlord.

I might not be able to build the pergola on my patio and create a space for entertaining.

I don't have to worry about a lease expiration, or having the house sold out from under me.

I've just about paid off my house. As long as I can maintain it, I can stay here as long as I choose.

On a scale of 1 to 10, the importance of the mortgage interest deduction on my decision to buy a house is about -243.

The only type of tax (at least personnel) that is not life style dependent is a head tax. You are alive you owe X. Maybe you have to be over 18 or something. The choice to own a home is a lifestyle choice as is what job you have and how many hours you put into it. Where you live (Iowa vs CA; City vs Country) all life style choices.

From the analysis I have read before (primarily a newspaper article (so you can tell it was really a long time ago) that was more about property tax) the taxes around home/real estate are pretty much a wash. Around the deduction, yes it helps many home purchasers directly, but similarly it helps renters indirectly. The groups it was least likely to help were the ones with just enough money to buy house--often they didn't have enough to itemize or it was trivially more. And they quite wealthy who it was usually tiny in their whole picture or if it wasn't they got caught by the AMT.

Ms Alkon: "I'm a little shocked by some of the nastiness (and stupidity in defense of it) that I see people sinking to here."

"I sense that much of the irateness here comes from people who's real message is: HEY, YOU AIN'T TAKING MY HANDOUT!"

"The meanness above in certain people's comments... is really disappointing."

The only irateness, nastiness, stupidity and meanness I've seen in this whole string of comments has come from you and those who agree with you in the form of name calling and insults when your logic fails and you're not willing to admit it.

As to my last comment above about you working 14 hours a day at some mundane job so that you can make more money and pay more taxes and not be subsidized by me, that was meant to be tongue in cheek. I was trying to point out the absurdity of your position on this issue by applying your (il)logic to your own situation. Sorry that my writing skills fell short of making that apparent. Notice that I also similarly applied your (il)logic to my situation (but you may not see it as similar if you actually do believe you're subsidizing my extra free time, which by your fallacious reasoning you are). For the record, it pleases me that you do what you want to do; I wouldn't want it any other way.

I too am a renter. I also don't think we should have this complicated tax system full of special deductions and incentives by which the political gang bangers in Congress try to induce the kind of economic activity they deem beneficial. I would rather see all of the special deductions and incentives abolished and a corresponding, across-the-board tax decrease for everybody.

But as long as we have this unjust, "tax us to death system we do" I'm not going to become ill with envy and resentment against my neighbors with mortgages because the government steals a little less from them than it does from me. I'm happy that the thieves have chosen to spare them a little. That's not unfair. The unfairness is that the government steals, not that it steals less from some than it does from others.

The answer isn't to get the government to steal more from the others. It's to get the government to stop stealing. As you know, a good way to move in that direction would be to start replacing the thieves in Washington with Libertarians in the next election.

"You mortgage-laden buffoons are clinging desperately to your gummint gimmes."

Don't get that shit on you.

I don't use the mortgage deduction. I use the standard deduction, instead.

Am I stealing from you and Amy by doing that?

If you use the standard deduction, you are paying less taxes, which means by the "logic" asserted here that you are subsidized by others who do not use that deduction.

Not so funny to wear that shoe, is it?

Sometime, you'll recognize that taxation is not a zero-sum game. What is not collected from one person is not automatically owed or paid by another, period.

"I don't use the mortgage deduction. I use the standard deduction, instead.

Am I stealing from you and Amy by doing that?"

I don't think so, Radwaste, but then again I am just stupid and nasty so what do I know. I twirl my Simon Legree mustache while I chuckle about the money I have stolen from the fair damsel by failing to pay my fair share in taxes by utilizing a deduction.

"Sometime, you'll recognize that taxation is not a zero-sum game. What is not collected from one person is not automatically owed or paid by another, period."

Couldn't agree more.

"You mortgage-laden buffoons are clinging desperately to your gummint gimmes."

No, Gog. No clinging. If it went away tomorrow, I wouldn't be affected in the least. Like I said before, I didn't buy a house for a deduction. I bought it to have a place to live. I never treated it as an investment and I didn't find something out of my price range. It's a nice place to live.... in a nice neighborhood....in a nice affordable city. I never realized taking a mortgage was something evil but, as a buffoon, I appreciate the enlightenment.

It's worth repeating - tax wealth, not income. --Gog_Magog_Carpet_Reclaimers at May 5, 2013 5:04 PM

Ok so I make $175K a year and I blow 70% of it on wine, women and song. So $122,500 of my income was blown away and I used the $52,500 in additional wealth in a for daily expenses. Meanwhile the conservative co-worker made $175K a year and invested 70% in stocks, bonds, and gold, silver and has $122,500 in various equities. He also used the $52,500 in additional wealth in a for daily expenses.

So you want the conservative coworker taxed because he bought $122,500 in various equities over 10 years. So his tax burden is on $1.2M (or more) meanwhile the coworker has no taxes because he spent his money and has nothing?

Fuck You! I refuse to support the wastrel.

"You mortgage-laden buffoons are clinging desperately to your gummint gimmes."

Gog, while I agree with you about the tax issue, this quote would have to evolve for 4 billion years just to reach the level of being bullshit.

I'm fully on record for being opposed to *all* of the special tax treatments being applied for various segments of society.

Nevertheless, I'm also entirely in favor of taking advantage of *every* legal means for reducing the amount of my income that is stolen by the government.

You want to get rid of all of the special interest deductions and favors, and improve the tax process?

I'm right behind you, let's make it happen.

You want me to voluntarily refuse to engage in legal methods to reduce my particular tax load?

Not gonna happen.

I refuse to be cowed or made to feel guilty for exercising my *entirely* legal ability to minimize my tax burden.

And, my exercising those legal avenues do not create an additional burden on someone else.

What I do not pay does not translate into you paying more.

I really *do* want a simpler and more useful tax code. I believe that it would be fairer and more equitable in the long run.

But, for the system in place now, I'm going to 'play by the rules,' and do whatever provides me with the greatest benefit.

Simply refusing to do so would benefit neither me nor you, and so has no actual value.

If I rented, I may not be able to plant my vegetable garden, or landscape the front yard.

According to some news stories featured here, some cites wont let you do that even if you do own the propert

"According to some news stories featured here, some cites wont let you do that even if you do own the propert(y)"

Yeah, I actively avoided those. Busybodies make me all stabby.

In my neighborhood, you pretty much have to go full on redneck (mow the lawn and find a car kind of thing) to get that kind of attention.

As long as things are kept maintained and taken even basic care of, it's not really an issue.

It's a decent neighborhood, just about everyone keeps things in shape.

Tax Wealth? Since we have an Income Tax, my general belief is that wealth was taxed as it was made. I don't see a reason to tax it again unless your are envious of those who have been more successful building wealth than yourself. I'm not wealthy nor do I expect to get there (one reason I probably won't)but I don't begrudge them what they or their ancestors worked for or expect that it should be mine.

Amy; the unspoken part of this debate is ownership. At the present, you're in a great situation. But in 5 years, when your landlord has married, and her mother wants to live closer to her daughter, what will be your options? None; we don't recognize squatters' rights in this country.

You don't own the home, you are at the whims of the landlord/owner.

That's a big part of why I bought a home. I enjoy the lifestyle, and I do not want to be at somebody's beck and call. If my wife wants to paint the house yellow; it's our call. But I know that I'm here for the long haul, and no person can make me leave.

Amy,

If I came across as making fun of you for the hours you work, I will just say I'm not. I don't have the skills to write like you do. I have respect for your work ethic and ability to write. For me, writing a book anybody would read would be close to impossible.

I will also say that I shouldn't have given you a hard time for not being prescient in regards to your profession and I wish you success as you pivot in your business endeavors.

I still don't agree with you that using a pre-existing tax deduction is stealing but I can be a little strident in my comments.

[Radwaste:] Wow, here's an eye-opener:

You really think your landlord doesn't get the deduction?

What do you think happens to your rent if that goes away?"

[Amy:] The landlord doesn't take a mortgage interest deduction. What he gets to do is write off all the the legitimate expenses of property ownership such as taxes, mortgage interest, repairs and rental expenses against what the tenant pays in rent. He then pays taxes on what he nets out of the rental as income to him.

So the answer as to what happens to your rent if the mortgage interest goes away for homeowners is...absolutely nothing.

Wrong.

Rentiers are in the business of renting. As with all businesses, if costs go up, prices go up. Your rent is lower than it would be if your landlord was not able to deduct the interest costs of his business from his gross income.

Therefore, excluding owner/occupiers from the mortgage interest deduction must have the effect of favoring rentiers.

In case that isn't completely clear, assume the mortgage interest deduction goes away tomorrow. My taxes go up, your rent remains the same. Then my brother and I decide to buy each others houses, then rent them to ourselves. My taxes go back down, but nothing fundamentally changed.

So, if you want to be fair, then agitate just as strongly for completely eliminating the tax consequences for all real property, regardless of whether owner occupied, or rented.

BTW -- there seems to be a real confusion here as to who is subsidizing whom.

Real answer: all property owners (as measured by the proportion of the mortgage that has been paid) subsidize all property purchasers. Which means that, since people typically own a larger proportion of their property over time, that older people are making it easier for younger people to purchase (or rent).

" Rentiers are in the business of renting. As with all businesses, if costs go up, prices go up. Your rent is lower than it would be if your landlord was not able to deduct the interest costs of his business from his gross income."

What the landlord is able to do is to write off almost all property expenses against the income he earns off of it.
This is not limited to his mortgage interest and taxes. The mortgage interest deduction is for homeowners not landlords.

The landlord is in business, and follows the tax laws for businesses, not homeowners.

The landlord like any other business has to figure out what rent to charge to make a reasonable profit off his investments. In this he is not unlike the guy selling widgets, and when the government distorts the market through tax breaks and penalties and differing tax rates on different income, it makes it tough on the landlord to figure out what to charge.

In the worst abuses some cities actually freeze rents, which then causes housing shortages, and no incentive for new construction.

if Amy's landlord no longer wants to rent his property out, she is in considerably better shape that the poor dude who bought his house during the bubble, and his new job is 3000 miles away which has happened to far too many people in the last five years.

"In case that isn't completely clear, assume the mortgage interest deduction goes away tomorrow. My taxes go up, your rent remains the same. Then my brother and I decide to buy each others houses, then rent them to ourselves. My taxes go back down, but nothing fundamentally changed."

First check your taxes with .your standard deduction, and then with your itemized deduction for mortgage interest and taxes, and compare the two.

Then realize that all the money your brother and you receive from each other has to be declared as income, which will increase your taxable income and possibly push you into a higher bracket.

The IRS is generally a stupid bunch, but they have figured this scenario out, and it will hammer you, (and possibly make you vulnerable to the AMT)

[Isab:] This is not limited to his mortgage interest and taxes. The mortgage interest deduction is for homeowners not landlords.

...

The landlord like any other business has to figure out what rent to charge to make a reasonable profit off his investments.

You made my point for me.

As an owner occupier, unlike a rentier, I do not get to depreciate anything. Like a rentier, I do get to reduce my tax bill by a portion of my mortgage interest.

The reason there are different tax laws for businesses is in order to determine net income.

But that isn't the issue here; rather, it is that, at the moment, allowing the mortgage interest deduction for homeowners puts owner/occupiers means the tax code treats them the same, in that regard, as renters (who are the ultimate beneficiaries of the tax deduction for rentiers).

Eliminating the owner/occupier mortgage interest deduction would mean that both property owners and owner/occupiers would be subsidizing renters.

Then realize that all the money your brother and you receive from each other has to be declared as income, which will increase your taxable income and possibly push you into a higher bracket.

Possibly. But there is nothing illegal about it, and considering all the writeoffs available to rentiers, it might well be that, at the end of the year, we could be better off.

Granted, there are a whole lot of "it depends" involved, but it isn't necessarily the case we would get hammered as the tax laws stand now. Eliminating the interest deduction for owner/occupiers, but allowing it to stand for rentiers, would make it more likely that buying each other's houses, then renting them back, would make financial sense.

"As an owner occupier, unlike a rentier, I do not get to depreciate anything. Like a rentier, I do get to reduce my tax bill by a portion of my mortgage interest."

You don't understand how depreciation works. It is good for equipment which has a limited life span, as you can write down the value until you junk it. Real estate usually appreciates, and if you depreciate it to get the tax break, there will come a time when it has no paper value left, and when you run out of depreciation or then sell it for more than its depreciated value, you get taxed out the wazoo.

My point is that your mortgage interest deduction is worth a lot less in the grand scheme of things than you think it is.

Your scheme to buy each others houses and rent them to each other has been anticipated by the IRS, and the tax code will punish you for it.

You won't be better off, but if you need convincing email me your income and deductions, and I would be happy to run the numbers for you.

Let me repeat, every dime of the "rent" your brother and you pay each other will be taxed as income to the person who receives it. The taxes and interest paid on the property will offset that income, but your taxable income as a landlord will be greater than your taxable income as a homeowner.

"Eliminating the owner/occupier mortgage interest deduction would mean that both property owners and owner/occupiers would be subsidizing renters."

The standard deduction, is the tax subsidy for those who rent rather than own.

You don't understand how depreciation works. It is good for equipment which has a limited life span, as you can write down the value until you junk it.

I have owned a rental property. Carpeting, paint, driveways, etc are depreciable by rentiers, but not owner/occupiers. (Both rentiers and owner/occupiers benefit from any appreciation in the property's value when they sell. I don't know about rental properties, but when I sold my house in MI at a $60,000 loss, it was all on me.)

My point is that your mortgage interest deduction is worth a lot less in the grand scheme of things than you think it is.

For most people, I suspect your point is correct, which is really what matters here. And since, in general, it isn't worth a great deal, eliminating it won't make a tinker's damn bit of difference, regardless of anything else.

The standard deduction, is the tax subsidy for those who rent rather than own.

Don't forget that a change in cost to rentiers will be reflected in a change in price to renters. Eliminate the mortgage tax write off to owners of rental properties, and rent will go up.

"Don't forget that a change in cost to rentiers will be reflected in a change in price to renters. Eliminate the mortgage tax write off to owners of rental properties, and rent will go up."

It will not, because landlords don't get a mortgage interest deduction, as I have explained before.

As far as your experience with rental property,
Of course, the loss was all on you. The IRS is all about heads we win, tails you lose.

However, you still misunderstand the difference between taking mortgage interest and other property expenses off of rental income to determine your net for taxation purposes, and the mortgage interest deduction for homeowners.

Eliminating the mortgage interest deduction above a certain amount, for homeowners will in no way affect the way it is treated when interest on a loan is an expense incurred on a rental property.

Let me explain the difference. Suppose you take out a home equity loan on your residence, and use it to buy a piece of rental property.
This loan is on your primary residence, so you can only take the interest and taxes off as a mortgage interest deduction, on your primary residence.
It is in no way attached to the income from your rental property. Any income generated from the rental property will be treated as free and clear income to you, What you can claim as an expense to offset your rental income will be property taxes on the rental property, and most expenses of making and keeping it habitable. So if you receive 12,000 dollars in rent, and spend 3k on maintenance and taxes you will net $9,000 which you will pay income taxes on.

Your principal payment is never written off of either a rental property or your primary residence, which is why the mortgage interest deduction is only really valuable for tax purposes if it is creative, zero down etc, or in the first few years, because as your principal payments get bigger and bigger, your interest is less and less until finally your itemized deductions meet your standard deduction, and it becomes more advantageous, and a hell of a lot less work to just take the standard deduction.

If you have a mortgage actually on the rental property, you then get to count the mortgage interest as an expense along with the taxes and maintenance which you subtract from the rental income, to come up with a taxable amount.

It sounds like you ended up in the worst of all property situations, which is a rental property that you were losing money on and then sold for a 60k loss.
The IRS does not reward you for losing money. They share in your profits, but your losses are all your own. You must have profits to write off your losses against, or you are well and truly screwed.
If you had made money on your rental property, and the property had not served as your primary residence for some period of time, the IRS would have treated your profits when you sold as Capital gains. This is why you do not want to depreciate rental property, the bigger the gap between the depreciated value and the selling price, the more you will pay in Capital gains tax.
It is tough making money as a landlord, even tougher in the kind of situation we have had for the last couple of years where people are renting out their property, not for any real profit, but just to keep from losing it to the bank.

Again, though, you misunderstand the meaning of depreciation. Carpet, paint, etc have nothing to do with depreciation. They are expenses that can be written off against rent collected.

"It will not, because landlords don't get a mortgage interest deduction, as I have explained before. "

Looks like you're wrong:

http://homeguides.sfgate.com/deduction-mortgage-interest-rental-property-2707.html

Relevant statement:

"To offset the income received from tenants' rents, landlords are allowed to deduct many common expenses the year they are incurred. The IRS allows the amount of interest paid toward a mortgage to be deducted the same year it is paid."

Maybe you want to restate your position.

It's one thing to be opposed to the idea of a mortgage interest deduction (while I'm not a fan, I'll take it if I can get it), and another thing to be utterly wrong in your view that is isn't an option.