Mortgage Interest and Maintenance Tax Deductions

We'll cross that bridge when we come to it.

NAR & NBR will never let that happen. They make too much money off of it.

nar & nab

not to mention npr.

what is the point of this thread? If the deductions "go away" the village idiot could tell you it would impact prices. So what's the point marco_m? If a meteor strikes Union Square and causes an ice age in New England, that will impact RE prices, too. Brilliant post. So insightful.

The chances of the interest deduction rules changing is probably higher now than ever before... The chances of a meteor striking Union Square probably hasn't changed.

I don't believe they will get rid of it for everyone. They'll probably limit it by income or interest amount. Of course the few who continue to be eligible for the deduction probably do standard deductions anyway...

its very important for someone like myself who is in contract negotiations. I wasnt aware of this possiblity until sifting through one of riversiders threads out of boredom. This is a potential gamechanger. Now we have to crank up excel and see what the percentages are.

Nothing is ever certain until it happens but I would place better than even odds that mortgage interest deduction goes away or is severely limited for incomes > $250K. They probably would have already announced it but they're worried about what that'll do to RE.

Policy is to reflate asset prices to protect the banks. This won't happen. Not now at least.

Not going to happen and it already is limited for those in the AMT (show me someone who makes > $250k who isn't). And it's not like you can use the possiblity of it happening in your contract negotiations, so as kylewest said what's the point of this thread.

It kinda makes sense for Obama to do this. This will pay for alot of his spending and its coming out of wealthy peoples pockets. no brainer for him.

So....using 5.5% discount rate (mortgage rate) and assuming 20% down..30yr fixed...ur looking at a 21% loss. i just took the PV of 1/3 of the interest payments in a 30yr fixed mortgage. OUCH!

i have no idea but would suspect that the aggregrate increase in revenue from this wouldn't be worth the backlash.

of course i can use it...I can choose not to sign! Need to find out more about it...

Choosing not to sign is not an part of contract negotiations; it's an end to them. Stay a renter marco, you're better suited to it (and that's not a dig, just a comment that if someone is going to obsess about every possible permutation of a purchase than they are probably better suited to renting).

Also, if you honestly have to worry about the direction of home values in the short run, you are not suited to BUYING; either you aren't putting enough down, or your living situation isn't permanent enough to allow you to stay in the home indefinitely.

If marco buys today and the rule changes next year, his place will be worth less and his cost goes up. The effect is long term.

There has to be a total return swap where one could hedge this.

riiiiiight. so people didnt care about deductable mortgage interest when they purchased...suuuure. to dismiss the possibility of the deduction going away would be financially reckless. just the notion of it going away gives the buyer more leverage. Its just another variable that needs to be priced in. For this one, I'm thankful to riversider.

hahaha..no trs for this one

the loss wont be as much as I thought..pv function in excel doesnt pick up the declining interest pmt..it took the 1st pmt and kept it constant through the 360 periods. Ill have to figure this out again.

"If marco buys today and the rule changes next year, his place will be worth less and his cost goes up."

Anything can change at any time.

Worrying about lawmakers taking away a meat-and-potatoes tax deduction that we've had for decades makes as much sense as worrying about them applying a sales tax to rent.

And frankly, if you're so close to the margin of affordability that the elimination of the mortgage tax deduction would suddenly make your apartment unaffordable, you're in the wrong price range to begin with.

this from the person who has posted over 1,000 times how great it is saving all that tax money?

its not about affordability. Its about getting the right price. Its about making informed decisions and not wasting money.

If mortgage tax deduction went away for individuals, there would still be ways around it. You could form an LLC, and transfer the property to the LLC. The loan interest would likely still be tax deductible for the LLC. Many Co-op's frown upon this now, but if mortgage interest deductions somehow went away, I think most boards would allow owners to buy through an LLC to avoid property values declining. Talk to an accountant or tax attorney if you are really worried about this. I seriously doubt that this will happen. The current administration seems to by trying to keep housing prices from falling, so this wouldn't make much sense.

NYCMatt, aren't you the same person who keep mentioning how great the tax deduction is?
To be fair, I know you think of it as icing on the cake, but most people don't. I think most people include that in their affordability calculations. If the rule changes, it will definitely have a significant effect on affordability and prices.

Besides, just because someone can afford to buy at $x doesn't mean he/she should pay $x.

Sunday, but as Matt says is the difference in the tax deduction changes the purchase from affordable to unaffordable then the buyer is in the wrong price point anyway.

And marco there isn't a single seller that is going to change the price based on the possiblity that the mortgage deduction will be eliminated. It will happen when it happens (and we'll have a flat tax before the mortagage deduction is eliminated) and until then it is nothing but guesswork.

jhochle: "The current administration seems to by trying to keep housing prices from falling"

That's why he'll likely just target the rich as usual; the ones with the large mortgage or high income.

Keep housing prices high= making houses unaffordable. Some socialist Obama turned out to be...

The mortgage interest deduction is pretty much the same exact thing as a business writing off interest expense. Unless Obama does away with LLC's or rewrites the business tax code to tax revenue instead of profit, there would be no point in doing away with the mortgage deduction.

The mortgage tax deduction is not going anywhere.

gatornyc, I agree that no seller will change prices now because of it. Again, I don't believe the deduction is going away for most people. However, if you're buying a $1m+ place and making $250K+/yr, it would be prudent to include in the affordability calculation the possibility that the tax deduction will change. The prices for such places will likely take a hit as well if the rule is changed.

If you are making 250k and buying a one million dollar place consider how long it would take to pay down the balance......

"NYCMatt, aren't you the same person who keep mentioning how great the tax deduction is?"

It is.

***

"To be fair, I know you think of it as icing on the cake."

So do I.

***

"I think most people include that in their affordability calculations."

That is a huge mistake.

"its not about affordability. Its about getting the right price."

It's that attitude that got us into this mess in the first place.

The price is never "right" if you ultimately can't afford it.

People respond to incentives
and right now the incentives are
interest tax deduction
250k/500k capital gains exclusion

It's not about paying off the debt.. but it should be

Being able to afford th place with or without tax is a given. I'm just doing my diligence and protecting my investments. Having gone through the cah flow analysis, the loss of the deduction is a significant event and if nothing , just distorts buy to rent ratios that much more. If I was an owner right now I would be pissed as well. That's potentially a good chunk of change right out of ur pocket. That why as a new buyer you have to try and lower ur purchase price for that possibility

I bought with a rent to buy analysis, but it didn't take me long to decide being debt free was the way to go..

They aren't able to deduct mortgage interest payments in Canada, and I've been told this is why middle class housing is less opulent than in the US. The cat has a long tail, as my grandmother used to say.

Actually, Obama already proposed it... so not sure why we're talking about meteors.

His plan had capping the deduction at 33%, meaning anyone in the higher brackets doesn't get to deduct all of it.

And, of course, any change in it would have a HUGE impact on prices, given that the deduction is part of the reason prices rose (which defeated the entier purpose of the deduction!).

"The mortgage interest deduction is pretty much the same exact thing as a business writing off interest expense. Unless Obama does away with LLC's or rewrites the business tax code to tax revenue instead of profit, there would be no point in doing away with the mortgage deduction. "

No, its not, not even close. Because income coming out of the company is still taxed at the personal level. Corporate tax represents a double tax.

Not to mention businesses can write off the purchase of a lot more than interest expense. They write off rent and advertising and all the things folks on salary generally can't.

Your logic just doesn't make any sense.

"And frankly, if you're so close to the margin of affordability that the elimination of the mortgage tax deduction would suddenly make your apartment unaffordable, you're in the wrong price range to begin with"

You're probably talking about 97% of homeowners...

"You're probably talking about 97% of homeowners..."

Link? Data? Evidence?

Pick your poison, Obama can remove the mortgage deduction or raise tax rates. It makes no sense that tax payers subsidize million dollar home purchases.

somewhere...

I am just saying that if the individual mortgage deduction were to go away, people could still buy real estate through an LLC, and still write off interest expense in much the same way as the mortgage deduction is used today. I know people that do this already. The LLC could be designed to show zero income so there would be no double taxation.

"His plan had capping the deduction at 33%, meaning anyone in the higher brackets doesn't get to deduct all of it. And, of course, any change in it would have a HUGE impact on prices, given that the deduction is part of the reason prices rose (which defeated the entier purpose of the deduction!)."

Not in the higher income brackets.

"Is it cheaper to own or rent?" is largely a middle class question.

Rich people (those making over $250K) do not make purchase versus rent decisions based on the mortgage interest tax deduction.

They certainly consider the write-off.

"Pick your poison, Obama can remove the mortgage deduction or raise tax rates. It makes no sense that tax payers subsidize million dollar home purchases."

Hold on there. Taxpayers are NOT "subsidizing" million dollar home purchases through the mortgage tax deduction. That money is NOT "taxpayer" money -- it's the percentage of money earned by those who purchased the million dollar homes that they get to protect from the greedy paws of The Taxman -- the same percentage that the REST of the "taxpayers" get to protect if THEY own homes, too.

Disagree, The mortgage interest deduction is not free money, it comes from the tax payer.

And the interest deduction results in higher home prices which benefit developers and real estate brokers.

No, it does not "come from the taxpayer".

It merely means the government isn't taking away as MUCH of our own money.

"And the interest deduction results in higher home prices which benefit developers and real estate brokers."

Prove it.

SInce when is greater than 250k out of the middle calss in NYC?

http://www.washingtonpost.com/wp-dyn/articles/A23859-2004Nov30.html

And then there is homeownership, which has somehow become synonymous with "the American dream." The mortgage interest deduction already costs the Treasury $62.6 billion a year, supplemented by billions more in implicit subsidy provided via Fannie Mae, Freddie Mac and the regional Home Loan Banks. To a large degree, however, this money has rewarded those already with homes while making it harder for everyone else to afford one.

How is that? Imagine there are two identical houses offered for sale on the same street, the only difference being that one comes with a monthly rebate of $250. Which house would you be willing to pay more for? Obviously the one with the rebate. How much more? Up to $249 a month, which at today's interest rates works out to roughly $50,000.

The home mortgage deduction is no different than a monthly rebate. Over time, its effect is to boost the price of the house until it incorporates most of the subsidy. And the more the house appreciates, the bigger the tax deduction, creating a dynamic of ever-increasing house prices.

What all of this suggests is that in a competitive marketplace, government efforts to help people pay for vital services can be self-defeating if they are not properly designed. That's something to consider during what are likely to be heated debates on health care, tax reform and aid to higher education.

"SInce when is greater than 250k out of the middle calss in NYC?"

The median income for New York City is $55,980. Only the top 8% of households in New York City earn more than $250K. Being in the top eight percent isn't in the "middle" of anything.

I thought the Obama proposal was to cap the rate at which you could deduct home mortgage interest at 28%. So, if you were in higher tax brackets, you would still need to pay the difference between your highest bracket and 28% on the amount of home mortgage interest you deduct.

I agree with Riversider. I'm in contract to purchase right now, and from a tax policy perspective, don't feel that taxpayers should be subsidizing what for most people in the U.S. would be an extremely expensive home, even if it is cheap for Manhattan. Granted, as a higher-earning individual, I subsidize a lot of government programs I'm not crazy about and think it probably evens out in the wash. But proposals to remove the mortgage interest deduction are fine with me.

On another note, there are plenty of true middle-class homeowners -- like my parents and grandparents -- who have never taken the mortgage interest deduction. They bought modest homes on modest incomes with larger down payments, and even with mortgage interest were better off taking the standard deduction.

http://www.realclearmarkets.com/articles/2008/04/repeal_housings_mortgageintere.html

The mortgage-interest deduction harms our economy in many ways. For one, it constitutes relief for one segment of society at the expense of those who choose not to own a home. Those who don’t are forced to subsidize homeowners through theoretically higher rates of taxation on income. Considering the static approach those in Washington take to tax cuts and tax increases, the revenues “lost” due to the mortgage deduction make it more difficult for Congress to reduce marginal tax rates. So in a sense the tax relief brought about by the deduction reduces the economy’s overall vitality through greater penalties levied on actual work.

On another point, why penalize the cash buyer. The borrower with a taxpayer subsidized mortgage is just competition who can bid the price up. Lower tax rates and remove the subsidy.

"And then there is homeownership, which has somehow become synonymous with "the American dream." The mortgage interest deduction already costs the Treasury $62.6 billion a year, supplemented by billions more in implicit subsidy provided via Fannie Mae, Freddie Mac and the regional Home Loan Banks. To a large degree, however, this money has rewarded those already with homes while making it harder for everyone else to afford one.

How is that? Imagine there are two identical houses offered for sale on the same street, the only difference being that one comes with a monthly rebate of $250. Which house would you be willing to pay more for? Obviously the one with the rebate. How much more? Up to $249 a month, which at today's interest rates works out to roughly $50,000.

The home mortgage deduction is no different than a monthly rebate. Over time, its effect is to boost the price of the house until it incorporates most of the subsidy. And the more the house appreciates, the bigger the tax deduction, creating a dynamic of ever-increasing house prices.

What all of this suggests is that in a competitive marketplace, government efforts to help people pay for vital services can be self-defeating if they are not properly designed. That's something to consider during what are likely to be heated debates on health care, tax reform and aid to higher education."

****

So you've managed to copy and paste an article written by another leftist liberal who shares the same wrongheaded thinking as you do. You haven't proven anything.

The mortgage interest deduction doesn't "cost" the Treasury anything. It simply means the Treasury isn't confiscating as much of the taxpayers' own money as it had hoped and planned.

The home mortgage deduction is not a "rebate", despite what the author asserts. Again, it is a DEDUCTION -- meaning the homeowner gets to keep more of HIS OWN MONEY. It's not money that's somehow "coming" from somewhere into his own pocket -- it's money in his pocket that's not leaving his pocket.

The money that "Bob Taxpayer" gets to KEEP in the form of less personal income taxes is NOT money that's somehow coming out of the pocket of "Juanita Contribuyente"; Bob is paying what he legitimately owes to the government, while Juanita (we hope) is paying what SHE legitimately owes. It all goes to the same place: the GOVERNMENT.

Liberals seem to either not get this, or refuse to get this.

How come everytime someone argues that $250k isn't all that stupendous an income in NYC someone touts avaerages for all of NYC, but whenever someone talks about average RE prices aor trends in all of NYC someone is apt to come here and point out that "manhattan prime" is not average?

The point is that if you are talking about the effect these deductions will have on NY RE in "Prime Manhattan" (and I will include the halo areas near them, or maybe add anything below 120 st on the UWS and 100th on the UES), then the tax effects of this tax rule absolutely affect the average pricing in those areas and the "middle class" that live there.

Matt, Why do you care so much about the mortgage deduction? If the government were to take it away and lower your tax rate why do you believe you would be harmed?

> No, it does not "come from the taxpayer".
> It merely means the government isn't taking away as MUCH of our own money

Not quite... it means the government is getting that amount from someone else.

So, essentially, we're all subsidizing the mortgage interest deduction.

"The mortgage-interest deduction harms our economy in many ways. For one, it constitutes relief for one segment of society at the expense of those who choose not to own a home."

That sums it up right there.

If you want the mortgage tax deduction, you can "choose" to buy a home.

However, if you "choose" to rent, you don't get the deduction.

If I wanted a child deduction, I'd "choose" to have a kid. But I didn't "choose" to have a kid, so I don't get the deduction.

See how it works?

You don't get to pick and choose when you use your averages just to suit your argument. (Though I am sure many will, regardless of what it does to their credibility).

"Pick your poison, Obama can remove the mortgage deduction or raise tax rates. It makes no sense that tax payers subsidize million dollar home purchases."

BINGO

Not quite. Renters do not get the deduction.

"How come everytime someone argues that $250k isn't all that stupendous an income in NYC someone touts avaerages for all of NYC, but whenever someone talks about average RE prices aor trends in all of NYC someone is apt to come here and point out that "manhattan prime" is not average?"

OWNING a home in Manhattan is largely an UPPER CLASS thing. In New York City, the "middle class" largely rents.

No one has ever disputed that.

"I am just saying that if the individual mortgage deduction were to go away, people could still buy real estate through an LLC, and still write off interest expense in much the same way as the mortgage deduction is used today. I know people that do this already. The LLC could be designed to show zero income so there would be no double taxation"

But there would be FULL taxation on what came out of it. Meaning there is NO effective deduction. You don't get ANY of that back on the taxes you're actually paying.

So, good idea... lets do it!

Interesting that subsidized costs are the ones that go up the most.
Health Care, Education & Housing.

"Matt, Why do you care so much about the mortgage deduction? If the government were to take it away and lower your tax rate why do you believe you would be harmed?"

I don't like anything that involves the government taking any of my hard-earned dollars.

Frankly, I'd like to see an abolition of all personal income tax, period.

"Hold on there. Taxpayers are NOT "subsidizing" million dollar home purchases through the mortgage tax deduction. That money is NOT "taxpayer" money -- it's the percentage of money earned by those who purchased the million dollar homes that they get to protect from the greedy paws of The Taxman -- the same percentage that the REST of the "taxpayers" get to protect if THEY own homes, too"

Sure they are.

If you lower taxes on half the population at random, and raise it on the other half, one side is absolutely subsidizing the other. We have that with this deduction.... which certainly doesn't benefit the poor.

The taxpayer subsidizing the rich always has a nice ring to it, but the interest deduction already does not exist for total mortgage indebtedness in excess of $1MM, and thus this deduction is hardly subsidizing the rich (at least in these parts where that is probably about an "average" mortgage). The interest deduction had relatively little to do with upward pricing pressure on large segments of Manhattan market and likely all of the second home markets (since the primary home mortgage likely consumed any deduction) because no deduction existed for interest on principal over $1MM and, as someone above said, even the deductable amounts are clawed back for "rich" people. And many other real estate markets became equally (or more) overheated as the US markets without the benefit of mortgage interest deductions.

In any event, someone needs to think long and hard if they think reducing, eliminating or sunsetting this deduction will have a net positive effect on tax revenues. The direct loss of capital gains taxes, mortgage and other recording taxes, and indirect loss of taxable revenues attributable to a falling or stagnant real estate and mortgage market, very well may far exceed any forgone revenues from a mortgage interest deduction.

"Not quite... it means the government is getting that amount from someone else."

From whom?

Does Uncle Sam go to all the renters in my neighborhood and say "Since Matt didn't pay all the taxes he should have, we're going to take more money from you guys."

Is that how it works?

Somewhereelse. Can an LLC be used as a primary residence?

> "And the interest deduction results in higher home prices which benefit developers and real estate brokers."
> Prove it

Easy. RE prices are correlated with income. Mortgage deduction goes at exactly that affordability factor.

Tell me you don't think this ISN'T the case.

"Renters do not get the deduction."

And childless couples don't get the child deduction.

What's your point?

"If you lower taxes on half the population at random, and raise it on the other half, one side is absolutely subsidizing the other."

How have you "raised" taxes on non-owners?

How are they paying more taxes, exactly?

http://www.thinkglink.com/article/2008/11/12/tax-deductions-who-should-own-primary-residence

> The money that "Bob Taxpayer" gets to KEEP in the form of less personal income taxes is NOT money that's somehow coming out of
> the pocket of "Juanita Contribuyente";

It certainly is with any government with a budget.

> Bob is paying what he legitimately owes to the government, while Juanita (we hope) is paying what SHE legitimately owes.

NOPE. you lose. Incorrect.

He isn't paying what "he owes". Both are paying WHAT THE GOVERNMENT DECIDES TO CHARGE.
If my tax rate changes, I "owe" more. Its because the government decided I should pay more.

Pretending that your tax break doesn't cost others is, sorry, STUPID.
Its like claiming that any spending doesn't cost anyone.

Its a ZERO SUM GAME, toots.

You are wrong.

> It all goes to the same place: the GOVERNMENT.

Exactly. So when the government gives you some of your $$ back, its coming from SOMEWHERE.

Jesus, how are you missing this.

> Liberals seem to either not get this, or refuse to get this.

Anyone with a brain seems to get this.

You should try it.

And childless couples don't get the child deduction.

Yes, this is another form of subsidy. Whether you agree this is desirable from a societal standpoint is another issue. But it is a subsidy and chidless couples are subsidizing.

"It certainly is with any government with a budget."

How?

***

"NOPE. you lose. Incorrect."

HOW is it incorrect?

***

"Pretending that your tax break doesn't cost others is, sorry, STUPID."

No it's not. Juanita's tax rate remains the same regardless of my tax deductions.

***

"So when the government gives you some of your $$ back, its coming from SOMEWHERE."

Indeed. It's coming from the same place where it originated: MY OWN PAYCHECK.

***

"Anyone with a brain seems to get this."

No. Anyone with a brain that's hard-wired to see things through a "victim" mentality gets this.

Its like claiming that any spending doesn't cost anyone.

"Yes, this is another form of subsidy. Whether you agree this is desirable from a societal standpoint is another issue. But it is a subsidy and chidless couples are subsidizing."

OMG.

Liberals simply refuse to get this.

I understand where you're coming from now. You seem to think that people with money somehow will always "owe" the people who don't have as much.

Subsidies with no cost, and those that defend it on Easy Sreet
...Panem et circumses

Somewhere.

Contact a tax professional. Maybe they can explain it better than I can. I know many smart, wealthy individuals that structure their real estate purposes within an LLC for tax reasons. Maybe they are all just stupid like you imply.

I know that me trying to calm people's fears about the mortgage tax deduction going away doesn't work with your efforts of trying to convince people that the sky is falling.

So person A pays 400K in taxes and person B pays 20K in taxes. If person A gets a 100K deduction, sounds to me like person A is just subsidizing less for person B.

Re: I know many smart, wealthy individuals that structure their real estate purposes within an LLC for tax reasons.

And most people have a creepy brother-in-law who manages to write off the cost of his new car (not to mention his morning coffee and vacations in Aruba) using some bogus "business".

Please try not to confuse esoteric tax shenanigans with what 99% of homeowners are inclined to do or capable of doing [aka "regular Americans" as Sarah would say]. Or maybe you're like a certain segment of the Supreme Court who now seems to feel that most Americans can lawyer-up at a moments notice to protect their "rights"?

Wow, West 34 that will be the last of your comments that I ever see. I am sorry that I am not a regular American like Sarah.

A business writing off interest expense is not an esoteric tax shenanigan by the way.

Thank you, West. I was just going to point this out.

Forcing EVERYONE to have to go through the cost and paperwork of creating shell companies just to get the tax deduction they always did as individuals is NOT a solution.

what it comes down is how greedy are you...i dont mind giving up my future MI deduction if it helps us get out of hole which we as a society dug.

"i dont mind giving up my future MI deduction if it helps us get out of hole which we as a society dug."

I do.

I didn't dig this hole.

And all the while we've been digging this hole, I've been paying MORE than my fair share of taxes all these years.

Down is up, Up is down.
Deduction goes away and real estate prices go down making them more affordable.

Suddenly we don't need gov't programs to subsidize mortgage payments. FHA programs where tax payers guarantee mortgages for borrowers with no down payment.

"Deduction goes away and real estate prices go down making them more affordable."

You assume.

Re: West 34 that will be the last of your comments that I ever see.

is depriving oneself of unable to grasp sarcasm an actual deprivation?

> "It certainly is with any government with a budget."
> How?

Really, Matt, you don't get how taxes work? Isn't this a kindergarden lesson?

If a government spends X, it collects X from me, you, Juanita, and your mom, +- debt (which just means taxes will be paid by someone else). However much you give back to Juanita or me or your mom, the rest has to be collected from everyone else.

> "NOPE. you lose. Incorrect."
> HOW is it incorrect?

See kindergarden definition above.

> "Pretending that your tax break doesn't cost others is, sorry, STUPID."
> No it's not. Juanita's tax rate remains the same regardless of my tax deductions.

Only if you make the mistaken assumption that tax rates don't change (which you'd be wrong on again... they're changing MAJORLY next year). Any loss of revenue from you will be made up by everyone else. In this case, a change in marginal rates, which is absolutely coming.

Wrong again!

> "So when the government gives you some of your $$ back, its coming from SOMEWHERE."
> Indeed. It's coming from the same place where it originated: MY OWN PAYCHECK.

Nope, try again. Because the government already spent your paycheck. They have to find the money elsewhere. If you get the deduction, someone else pays for it.

> "Anyone with a brain seems to get this."

> No. Anyone with a brain that's hard-wired to see things through a "victim" mentality gets this.

> Its like claiming that any spending doesn't cost anyone.

Actually, thats the same dumb logic as you! That's what you're saying! If there is spending, and you get taxes back, it costs someone else!

Wow, matt, you are dense.

Its worse than playing victim, its pretend playing hero! Acting like you're special for paying taxes! And that you have a right to pay less than others! Sorry, dude, you're being subsidized!

This is kindergarden level stuff.

Really.

> "Deduction goes away and real estate prices go down making them more affordable."
> You assume.

OK, now matt is just flauting his ignorance.

"Forcing EVERYONE to have to go through the cost and paperwork of creating shell companies just to get the tax deduction they always did as individuals is NOT a solution."

Of course the current system of subsidizing Matt and others to buy overprices homes was not only not a solution... it WAS THE PROBLEM!

"And most people have a creepy brother-in-law who manages to write off the cost of his new car (not to mention his morning coffee and vacations in Aruba) using some bogus "business"."

Unless he writes off the cost of his house, this is a red herring!

"If a government spends X, it collects X from me, you, Juanita, and your mom, +- debt (which just means taxes will be paid by someone else). However much you give back to Juanita or me or your mom, the rest has to be collected from everyone else."

So then the government goes BACK to Juanita and asks for more money, is that correct? Is there a SECOND tax day during the year for these extra taxes?

***

"Of course the current system of subsidizing Matt and others to buy overprices homes was not only not a solution... it WAS THE PROBLEM!"

Again, not taking AS MUCH of my own money doesn't mean I'm being "subsidized".

On the contrary, *I* am subsidizing most other taxpayers since MY taxes every year add up to more than the city's median household income!

jhochle- I'm a tax attorney. Owning through an LLC would not help. First, you have to assume that the LLC checks the box to be treated as a corporation (otherwise it has no tax effect if wholly-owned). Assuming you did that, you would get an interest deduction, but you would also have to pay tax on the rent paid to the LLC. Maybe the two will net or would net after factoring in depreciation, but you would still end up losing the current benefit of deducting interest and not paying tax on your implied rent. Plus, you would not benefit from the 250/500k exclusion for a sale of your primary residence. You might also have to pay tax on distributions from the LLC or upon liquidation.

BTW- this is a general statement and is not meant to constitute tax advice. You should contact your tax professional before making any decision about how to structure a transaction.

Mytwocents -- how dare you counter jhocle's naive, simplistic, second-hand, and ultimately incorrect, anecdotes with actual facts! Next thing you know, everyone will be doing that here.