Nicole Gelinas of National Review has a nifty little piece from The Corner laying out the wrong-headedness of the home mortgage deduction. Long-time readers know that this is a particularly troublesome feature of our tax code to me, one that encourages people who shouldn't buy houses to do so, while unreasonably favoring one brand of investment over another. Let's face it gang, our financial crisis was not brought about by too few people owning houses.
I continue to advocate phasing out the home mortgage deduction completely--in steps over a ten year period.
I doubt that any Congress would have the will to follow your recommendation. It would probably be survivable, at least by those who have lived within their means in buying a house, but the wailing and gnashing of teeth would be too much for the typical politician.
ReplyDeleteThe primary effect would be to drive up income tax collections, by pushing people into higher brackets. The secondary effect - the one you desire - would be to decrease the number of people attempting to own a house.
Phasing it in over ten years makes sense. Would you limit the deduction to mortgages taken before the effective date of the law?
Nope. I would apply it to all.
ReplyDeleteWould you make the 10-year period revenue/tax neutral somehow?
ReplyDeleteSo you favor raising taxes on home owners and by default putting them at a disadvantage to landlords. If you end the home mortage deduction then end depreciation on rental property. Treat but types of property owners the same.
ReplyDeleteIf making it tax neutral is important for passage, then I'm all for it. But I'm not hard over on it.
ReplyDeleteBill--you're going to have to let me know exactly how a mortgage holder would be "disadvantaged" compared to a landlord.
From www.real-estate-owner.com
ReplyDelete"Rental Property can be an effective tax shelter due to
Depreciation
Be sure to Depreciate your Rental Property because the IRS
assumes that you take it! If you don't take the Depreciation,
you will have to pay taxes on the property when you sell it
through Depreciation Recapture!"
While I was on active duty I rented a house and town house. For both situations the depreciation expense played a large part in losing money or at least breaking even. If you are not going to let me take the mortgage interest deduction but allow depreciation then I will form a LLC to buy my house and then lease it back to me. I will then depreciate the house to improve my profit on the rental income.