Cohn: 'People don't buy homes because of the mortgage deduction'

a reply to: Phage

Isn't that only for five years?

a reply to: Deetermined

It depends on the asset. For most equipment, yes.

But it doesn't matter, it is an advantage if you can write it all off in the year you buy it.

a reply to: Phage

As it pertains to Trump, I'm wondering about the depreciation on rental property.

a reply to: Deetermined

Rental property currently depreciates over a period of 27.5 years.

The new rules would not apply to property already being being depreciated under the old rules, only to new purchases.

But because Trump was subject to AMT (presumably, we can't know for sure) and won't be now, it's sort of moot for him.

So Stupid ok this tax thing is for people who's homes are 250 k and over and earnings over 300 k .
Got news for you millions of people have houses under 100 k
My sons home he is buying was 110 k 3 % Fixed rate .
Morage is 730 a month That includes escrow for taxes and insurance .

This house he could rent it out for 1200 $ a month easy the crapest 3 bedroom in this town goes for 850 a rare find and averges 1100 a month .

Me I am no great tax knowing person but I do understand how to get credit and do understand even if my son could find a 3 bed room to rent for 600 he would still be better off to buy his own .
Anyone who is stupid enough to pay off another guys house ( in rent )
deserves exactly what they get 30 years later . NOTHING .
Even buying and losing the house is better then renting
Ps decent house decent neighborhood been here over a year rarly do cops need to come down this street .
school is better then most

a reply to: FyreByrd

I can't speak to what is in the hearts and minds of others but for my wife and I, we purchased our home primarily for freedom. Our default setting is to want to do what we want to do (and how we want to do it). We always hated giving someone else (like a landlord) authority over our life to dictate whether or not I can have a dog or whether or not we can make some kind of modification to our residence. We have also been through the situation of living in a property that was going to be sold with no way of knowing if the new owner would continue to rent to us.

Although physical possessions are fleeting, we very much enjoy and appreciate possessing our own little patch of God's green Earth.

Was there a financial consideration in purchasing our home? You bet'cha. However, any tax deduction was an afterthought. The primary motivation, financially speaking, is that with each mortgage payment, despite our lender getting their cut, we are building equity. From our perspective, each month we are paying for our own mortgage, not the mortgage of someone else.

Regarding the overall sentiment of this thread (as I perceive it), it would be like someone having a child to gain a tax credit while ignoring the thousands and thousands of dollars it takes to raise a child. Really doesn't make much sense (although I do admit that common sense is less and less common these days).

a reply to: midnightstar

Where I live (on an island, so options are limited) the current median price for a single family home is $750,000. You're not going to find anything for less than $200 and at that price it ain't gonna be anything special. See, inventory is limited and demand is high. That means a mortgage payment of upwards of $2,000. First time buyers? Good luck.

The rental market is similarly tight, so guess what? Rental prices (for a single family home) are upwards of $2,000. Add the cost of taxes, insurance, and maintenance and the equation gets close. So, that interest write off is of some concern.

You see, not everyone is in the situation you are in. I will still be itemizing, but by losing those other deductions, I don't know that I'll be paying less.

No one buys a home for the mortgage interest deduction. If anything, government should be getting rid of the mortgage interest deduction and replace it with a mortgage principle deduction instead to encourage people to build more equity.

a reply to: Edumakated

No one buys a home for the mortgage interest deduction.

Correct. But for many it has something to do with the decision.

If anything, government should be getting rid of the mortgage interest deduction and replace it with a mortgage principle deduction instead to encourage people to build more equity.

I don't understand the point. Paying the principle increase equity all by itself.
A tax deduction for it would not add equity.

originally posted by: Phage
a reply to: Edumakated

No one buys a home for the mortgage interest deduction.

Correct. But for many it has something to do with the decision.

Very little. People know over the long run, owning is better than renting mainly due to the equity gains. However, the mortgage interest deduction is not something that 99% of people are factoring into their purchase decision.

originally posted by: Phage
a reply to: Edumakated

No one buys a home for the mortgage interest deduction.

Correct. But for many it has something to do with the decision.

Regarding the a principle deduction versus interest deduction, my point was that the tax code should encourage people to pay their mortgages off sooner by making extra principle payments above and beyond their normal amortizing mortgage payment deductible instead of interest payments.

The current system encourages and rewards taking out more debt. Instead the system should be encouraging and rewarding people getting out of debt.

originally posted by: Edumakated

originally posted by: Phage
a reply to: Edumakated

No one buys a home for the mortgage interest deduction.

Correct. But for many it has something to do with the decision.

Very little. People know over the long run, owning is better than renting mainly due to the equity gains. However, the mortgage interest deduction is not something that 99% of people are factoring into their purchase decision.

I can't speak to what other peoples' strategies are but I can say that if anyone is seriously considering purchasing a home and an interest deduction becomes a major factor in the decision making process....

Based on the overall costs of mortgage, insurance, taxes, maintenance... if that tiny amount of the deduction plays a factor.... the people in question probably (in my estimation) aren't ready to purchase a home.

a reply to: Edumakated

The current system encourages and rewards taking out more debt. Instead the system should be encouraging and rewarding people getting out of debt.

Why? When the "system" itself is based on debt. Look how much the government borrows each year. Because of this tax "reform", they are going to have to borrow even more, each year. There is actually a good argument to be made that mortgage debt is "good" debt since it is based on an asset which (presumably) appreciates. What asset is government debt based on? Does it appreciate?

How does a tax deduction on mortgage interest encourage taking on more debt? It seems that most people disregard it (judging from some here have said, as well as Cohn). And it's not as if the resultant tax decrease matches the interest expense.

If this plan (which will eliminate deductions for property taxes as well as state income taxes) gets anywhere I doubt my tax burden will decrease significantly, if at all. I have no doubt that the president's will. Significantly.

But, judging from the comments in this thread, Cohn is right. People don't pay much attention.

I believe that most people buy a home because they are tired of dealing with slumlords ( and make no mistake about it all landlords are slumlords in some degree or another) and paying increased rents evry year with decreased maintainence every year.

if you`re buying a home to get a mortgage interest deduction on your taxes then you`re buying a home for the wrong reasons,and you won`t properly maintain that home.you`re one of those people who buys a home and lets it fall apart for 10 years and then try to sell it for market value and wonder why it won`t sell.

when I had a mortgage I never deducted the mortgage interest from my taxes because, well it was the only significant itemized deduction I had and it was just easier NOT to itemize my deductions.

so, yeah I`m one of those people that paid more taxes then I had to but sometimes it`s worth it to pay a little more in taxes than to have to deal with the government tax codes, and that`s probably why the tax codes are the way they are.

a reply to: face23785

There are a lot tax deductions when you buy a house,unlike a car,why pay rent if you can recuperate some of your money,plus build equity,how much can you write off for rent a year? 75.00

This 'beautiful new tax plan to help the middle class' is going to be just like the 'beautiful new cheaper and better healthcare for everyone' --- a thinly veiled screwing of the majority to the benefit of the rich and corporations. If only people would think for themselves and actually read the information being provided --- as scant as it is.

a reply to: FyreByrd

For me, the mortgage interest deduction was an enticement to buy a home instead of renting one ... because in addition to the equity I get from paying off my mortgage, I also get that tax break on the interest.

It is not a huge tax break, but for a middle income guy like me, every dollar that I can claw back from the Feds is one more I can spend on my dependents. That's a winner!

Without the interest deduction, would I have chosen to rent instead of buy? Hmm. I can't go back in time to answer that very well, but maybe.

To even profit from the equity you need to avoid paying mortgage insurance and are required to place 20% down in most contracts to negate this fee.

I don't know why most people buy a house, but I know why most people don't.

They don't have 20% of a box of cigarettes to their name.

The mortgage deduction was NEVER a factor in us buying.
The low interest rate, the freedom of not having a landlord, the eventual equity however WAS.

Another factor was it was in a area of practically zero land development, stable taxes, good access to major highways, almost no commuter congestion, low cost of living so our paychecks went further.

originally posted by: Phage
a reply to: Edumakated

The current system encourages and rewards taking out more debt. Instead the system should be encouraging and rewarding people getting out of debt.

Why? When the "system" itself is based on debt. Look how much the government borrows each year. Because of this tax "reform", they are going to have to borrow even more, each year. There is actually a good argument to be made that mortgage debt is "good" debt since it is based on an asset which (presumably) appreciates. What asset is government debt based on? Does it appreciate?

How does a tax deduction on mortgage interest encourage taking on more debt? It seems that most people disregard it (judging from some here have said, as well as Cohn). And it's not as if the resultant tax decrease matches the interest expense.

If this plan (which will eliminate deductions for property taxes as well as state income taxes) gets anywhere I doubt my tax burden will decrease significantly, if at all. I have no doubt that the president's will. Significantly.

But, judging from the comments in this thread, Cohn is right. People don't pay much attention.

You are conflating two different things. I don't disagree that the system is debt based. That wasn't my point. My point is that if politicians really cared about consumers, they'd make additional principal payments deductible instead of the interest. The point is to encourage people to get out of debt on their own. Society should be rewarding people for being debt free, not debtors.

It will never happen because the banks care more about getting a stream of interest payments as that loan is worth more than the mortgage that gets paid off in a timely manner or ahead of schedule.