the mortgage interest deduction, changes ahead?

would not surprise me

Lets tax the crap out of anyone who makes over $250K. If this country had tons of poor people who would work for $10 / day, we too could be great like India and China. Lets manufacture trinkets and rugs! It's all these damn wealthy people that are screwing things up.

I agree with the possibility of only primary residence. However if they were to do away with the credit based on the artificial $250k, they would cause a massive crash in housing in places such as New York City. Speaking as someone who already is concerned about the artificial $250k in the city it would crash me out if i lost my interest deduction. Most people buy based on after tax costs and considering interest will be the largest itemized deduction it would hurt many. A $700k mortgaged at 5% is $35k in interest per year and removed that would caused someone paying 28% would lose $10k in tax benefit, roughly $800/mo.

As much as they want to do away with it most do realize that it is to heavily invested in how people are valuing homes. The problem is it would be another round in a decrease in home values and cause more mortgages to be underwater.

If anything this is probably an issue for many years from now after the markets have stablized when they could really see what effect it would have on some of the larger real estate.

There is only so long they can hit the coasts for more taxes based on the fact that they are only making more money from the viewpoint of not factoring in cost of living.

In light of the sheer magnitude of negative equity homes, I would hope that - 1) the home equity loan will lose its' deductibility - hell, they shoud be outlawed. 2) only the mortgage on a primary residence is tax deductible 3) Only 80 % of a home's value will be deductible. If you borrow 95% of the value, 15 % will not be deductible. 4) mortgages of $750,000 or less will be deductible

I dunno but I do, if you are fked cause of mortgage deduc bye bye and bitching about $20k increas in taxes, maybe it's time to move or admit you were a lemming for buying in the last 5 years. I mean we were screaming about mortgage interest deductions on se as soon as Lehman hit. That was 2 yrs ago! I said just wait till the dust settles on taxes bf blowing it all on nyc re. Notta my faulto you r so financiallyio stupidio, graci.

Mikev,

"I agree with the possibility of only primary residence. However if they were to do away with the credit based on the artificial $250k, they would cause a massive crash in housing in places such as New York City. Speaking as someone who already is concerned about the artificial $250k in the city it would crash me out if i lost my interest deduction. Most people buy based on after tax costs and considering interest will be the largest itemized deduction it would hurt many. A $700k mortgaged at 5% is $35k in interest per year and removed that would caused someone paying 28% would lose $10k in tax benefit, roughly $800/mo. "

don't forget that you still have the standard tax deduction, so you don't lose it all, just the differential. for 2010 the standard deduction for married couples filing a joint return remains unchanged at $11,400. So the $800/month are actually $540. If you agreed to get in debt to the tune of $700k... the $6,5k/year that you took for granted is not even 1% of your mortgage debt! If this crashes you imho you are already in deep financial trouble.

The benefit of getting away with this deduction imho is making sure that realtors don't have this very overused sale pitch that lures in the naive... that end up taking the std deduction anyway (more than 80% of homeowners do in fact).

you really are not correct because you have to realize that someone making $250k and living in nyc is already way over the standard deduction with state/city taxes. So that is why i am using the whole amount as a loss.

It is not a matter of crash but remember when looking at buying vs renting these amounts are used in calculations and would clearly change the minds of a lot of buyers if you were to lose $800 of differential each month.

To me if i am paying $5000 after tax savings for my 3br and to get something similar would have been lets say $4600, but the extra $400 is worth it to make the apartment my own, meaning renovate whatever it is I please, then that is fine. However if you now lose that $800 per month i am at $5800 vs $4600 and my viewpoint is a lot different. I would be more willign to put up with not being able to make it my home with renovating the way i want.

So my point was not financial crash but more the value would need to come down so that cost of home ownership was more in line with rental, even if slightly higher.

Most use standard deduction becuase most home values are 100k or less, so the mortgage interest is very small, state income taxes are also low in those areas. But if you look at the new york area and california, etc, you will see much more use of the itemized deduction.

Mikev, if markets head towards a rational equilibrium, the price is going to go down anyway, with or without the taxpayer funded subsidy for over-indebted upper middle class taxpayers.

Investors don't get this particular form of welfare entitlement. So they will not take it into account. If the same unit is worth more to an an owner-occupant who thinks like you than it is to a renter or rational investor, then all investor-owned property is shadow inventory until prices drop to the point where investors don't care whether they hold to rent out or sell.

If prices drop to that point, as ordinary market economics suggests will happen in a competitive market, the drop will dwarf any effect of the mortgage interest tax subsidy.

If markets do not return to rational equilibrium but continue to sell at bubble prices, the tax subsidy is irrelevant to pricing anyway, so why do you care?

wouldn't it be grandfathered..nevertheless don't see it happening with the re lobby buying dc

No one has the balls to do anything that will have a negative impact on housing right now. Not a chance.

"wouldn't it be grandfathered..nevertheless don't see it happening with the re lobby buying dc".... Brilliant comment, maybe they can grandfather in the Reagan tax rate of 28% also.

The mortgage deduction should go away, but politicians won't touch it. Removing the interest deduction (subsidy) would hurt resale values of existing homes , bad for votes and bad for banks sitting on foreclosed properties. Plus ending the deduction is a guaranteed way to for any politician signing on not to get re-elected.

Of course ending it IS THE RIGHT THING TO DO.

Never understand why renters get the short end. If the gov't wants to help the lower income people, why not let them deduct rent with a cap on income?

"Brilliant comment, maybe they can grandfather in the Reagan tax rate of 28% also."

Apples to oranges you're talking tax code vs rates.. currently grandfathered debt pre- 10/13/87 doesn't have the $1mm cap of post '87 debt..

how's the studio rental search in Hempstead, did you pay steve his commission from his rental website prior your search or after he bamboozled you with his colorful charts from curbed?

which planet are any of you on? if anyone still paid attention to Obama and the Dems were going to increase their majorities in Congress, perhaps this would be a worthwhile discussion. But with Dems and moderate repubs being replaced by further right repubs, there is essentially ZERO chance that you will see a reduction of the mortgage interest deduction.

Well considering that many states and localities have a real estate tax, it almost seems fair..