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Mortgage Interest Deduction

Original post made by dublinmike on Dec 3, 2010

The "Deficit commission" has recommended to change the mortgage interest deduction when filing your federal income taxes. It would reduce the maximum loan amount from $1,000,000 to $500,000. Big deal, if you already pay the Alternative Minimum Tax you possibly lost the benefit.

But, the available deduction would be reduced to 88%. At a glance, some would say it's not the end of the world. But,could it be reduced further? Likely at some point. Once the ball starts running downhill it's hard to stop.

If you are against reducing or eliminating the MID, please call Representative Jerry McNerney's office at either 202-225-1947 or 925-737-0727 today.

For further information and comment: Web Link

Comments (11)

Posted by Stacey, a resident of Amberwood/Wood Meadows
on Dec 3, 2010 at 11:10 am

Stacey is a registered user.

You're right, the AMT issue is bigger than the MID.

As far as I recall, the commission didn't just recommend to change the MID, but to also lower the tax rates. The net effect would be that what you pay in taxes would not significantly change due to the elimination of deductions. I'd be willing to trade my MID for lower taxes.

Here's some other analyses:
Web Link

Web Link

Web Link

Posted by not correct, a resident of Another Pleasanton neighborhood
on Dec 3, 2010 at 6:23 pm

"if you already pay the Alternative Minimum Tax you possibly lost the benefit."

Mortgage interest is not subject to reductions for AMT. There might be other reasons to keep or eliminate this deduction but AMT is not one of them.

Maybe we should rethink the whole "house as a deduction" thing. In Canada mortgage interest has never been a deduction and gain on the sale of a principle home has never been taxed. They also did not suffer the same real estate meltdown that we did.

Much of our economic problems stem from realtors who convinced buyers that they could afford everything because it would all be tax deductible. Was is Shakespeare who said "first kill all the realtors"? Oh, no that was kill all the lawyers. Whatever.

Posted by Reality, a resident of Another Pleasanton neighborhood
on Dec 3, 2010 at 6:34 pm

If you feel comfortable placing blame on the housing market then at least we should include all responsible parties. Seems like it was touted as a great accomplishment from the administration at the time:

"This Administration will constantly strive to promote an ownership society in America. We want more people owning their own home. It is in our national interest that more people own their own home. After all, if you own your own home, you have a vital stake in the future of our country."

- President George W. Bush, December 16, 2003

"The Accomplishments

Increasing Homeownership

* The US homeownership rate reached a record 69.2 percent in the second quarter of 2004. The number of homeowners in the United States reached 73.4 million, the most ever. And for the first time, the majority of minority Americans own their own homes.
* The President set a goal to increase the number of minority homeowners by 5.5 million families by the end of the decade. Through his homeownership challenge, the President called on the private sector to help in this effort. More than two dozen companies and organizations have made commitments to increase minority homeownership - including pledges to provide more than $1.1 trillion in mortgage purchases for minority homebuyers this decade.
* President Bush signed the $200 million-per-year American Dream Downpayment Act which will help approximately 40,000 families each year with their downpayment and closing costs.
* The Administration proposed the Zero-Downpayment Initiative to allow the Federal Housing Administration to insure mortgages for first-time homebuyers without a downpayment. Projections indicate this could generate over 150,000 new homeowners in the first year alone.
* President Bush proposed a new Single Family Affordable Housing Tax Credit to increase the supply of affordable homes.
* The President has proposed to more than double funding for the Self-Help Homeownership Opportunity Program (SHOP), where government and non-profit organizations work closely together to increase homeownership opportunities.
* The President proposed $2.7 billion in USDA home loan guarantees to support rural homeownership and $1.1 billion in direct loans for low-income borrowers unable to secure a mortgage through a conventional lender. These loans are expected to provide 42,800 homeownership opportunities to rural families across America."
"President George W. Bush - Record of Achievement - Chapter 7 - Expanding Home Ownership"
Web Link

Posted by Me Too, a resident of Another Pleasanton neighborhood
on Dec 3, 2010 at 8:51 pm

So let's continue our grand tradition of blaming someone else (such as the President) for people being stupid. We blame a bartender because someone drive drunk. We blame McDonald's because their "hot coffee" is hot. We blame a toaster manufacturer because we get injured when we shove a knife in the toaster when there were only 3 warning labels to never ever ever stick a knife in the toaster - we say there should have been 4 warning labels.

So please continue to blame Bush or Obama or whichever President you choose, because its easy. Its a nice easy feeling to blame one person as opposed to trying to blame Congress, because we can't put a face to Congress. So as long as it makes your life happy, blame who you want, but until we start having real accountability for our own actions, our country will continue in its downward spiral.

Posted by not correct, a resident of Another Pleasanton neighborhood
on Dec 4, 2010 at 7:39 am

Here, here Me Too.
What gets me the most is that all of those people who let greed and stupidity lead them down the path of home ownership (wait a minute, how can you "own" something when you put zero money down?) got a tax free break that we pay for. Don't want to pay on your underwater mortgage? Walk away from it and let the taxpayers pick up the tab. You will owe nothing in taxes when your greed causes you to leave the home that you could never afford in the first place.
Should we feel sorry for the person who put down nothing, pays the mortgage for a few months then walks when the house fails to appreciate 100% in 90 days (like the realtor assured them it would)? Their credit will be tarnished for 7 years -- big deal! -- they were never credit worthy in the first place!
I am all for accountability, one hundred percent accountability. You signed the docs saying you would pay the loan. Now pay it.

Posted by HOME tax even worse, a resident of Another Pleasanton neighborhood
on Dec 4, 2010 at 11:30 pm

Actually, Obama's sales tax on primary residence starting in 2012, is even worse. We need that researched and exposed...I think, they think, we'll not be noticing when that was stuck in the bill.
We know when it was stuck to us.

Posted by dublinmike, a resident of Dublin
on Dec 7, 2010 at 9:33 pm

"HOME tax even worse"...where do you get "sales tax" AND by President Obama?

Please, stay off my original post if you cannot provide documentation.

Posted by Homeowner, a resident of Another Pleasanton neighborhood
on Dec 8, 2010 at 8:08 pm

I read today in TIME magazine that the proposed change in mortgage tax deduction will NOT affect current mortgages which will be "grandfathered-in" and, apparently, still be able to deduct mortgage interest.

I suppose there are certainly implications to this:
Will this make us all want to stay in our current home? And will that lead to more remodeling projects vs. new home purchase? Will our children even want to buy homes? And will all this kill the housing market???

Posted by question, a resident of Another Pleasanton neighborhood
on Dec 8, 2010 at 9:05 pm

When did it become the government's business to promote homeownership? Isn't that a big part of what got us in to the current mess?

Posted by HOME tax even worse, a resident of Another Pleasanton neighborhood
on Dec 8, 2010 at 11:46 pm

Dublin Mike, first you don't own or control PW.
Second, surely by now you and the Dem Congress have had enough time to finally read and learn all the varied and assorted issues that at buried in those 2,000+ pages of the 'Health Care Bill'. Along with taking away college bank loans from Bay Area kids, there is a new TAX, Jan 1, 2013, on profit from the sale of your home.
.............HC bill just had to get rammed thru in the night, with nobody reading it.. Remember Pelosi's famous quote, you can read it after you sign it.

Posted by question, a resident of Another Pleasanton neighborhood
on Dec 9, 2010 at 9:14 am

"there is a new TAX, Jan 1, 2013, on profit from the sale of your home. "

Well I should hope there would be. When did it become the government's business to pick winners and losers? What is so special about the sale of a home that it should be exempt from taxes. We've all seen the results of the government interfering in the housing market to promote home-ownership. It resulted in the worst recession since World War II.

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