How would you feel about allowing the mortgage deduction for everyone....

6SpeedTA95 · 05-13-2007, 01:36 PM

We all know about the mortgage deduction but many do not know that you can only claim this deduction if it exceeds 10,000 dollars in interest or puts your total itemized deductions above 10k then and only then can you claim the deduction. Let me give you an example

Household 1:
Income 150,000
State Taxes 7,500
Property Tax 3,500
Mortgage total 22,165.80 (assuming 300k mortgage)
Interest on 30yr fixed at 6.25% for the first year is 18,650.44

Total tax deductions for the household 29,150.44

This exceeds the standard deduction of 10,800 dollars by 18,350.44.

Houshold2:
Income 80,000
State Taxes 3,600
Property Tax 1,500
Mortgage total 8866.32 (assuming 120k mortgage)
Interest on 30yr fixed at 6.25% for the first year is 7,460.17

Total tax deductions for the household 12,560.17

This exceeds the standard deduction by only 1,760.17

Household3:
Income 45,000
State Taxes 1,600
Property Tax 900
Mortgage total 5541.48 (assuming 75k mortgage)
Interest on 30yr fixed at 6.25% for the first year is 4662.61

Total tax deductions for the household 7162.61 meaning the household has to take the standard 10,800 dollar deduction to minimize their tax bill.

As you can see both middle class households can NOT claim their full mortgage interest on their taxes. Instead they're having to try to meet the minimum standards for itemization. The upper middle class home easily gets the deduction.

Since everyone gets the same 10,800 dollar deduction I would propose just eliminating that deduction and altering the tax code to reflect shifting all the brackes higher by 10,800 dollars to reflect the difference. I would also then say we need to give EVERYONE a mortgage deduction regardless of the size of their mortgage and interest being paid. The middle class is being hampered in this area IMO and many go into a home situation thinking they'll be able to deduct the interest only to find out this isn't a deduction that goes above and beyond your normal deductions it must be in addition to your other itemized deductions and you must exceed the minimum 10,800 deduction before you can claim any of it on your taxes.

I think it could be a huge boost to every household making less than 120k/yr and help lower the tax burden on many households throughout the country while simultaneously encouraging home ownership.

Thoughts?

Diesel66 · 05-13-2007, 03:53 PM

The homes that cant claim mortgage deduction are already getting a larger deduction by using the standard deduction.

Do you want them to double-dip ?

6SpeedTA95 · 05-13-2007, 04:34 PM

Originally Posted by Diesel66

The homes that cant claim mortgage deduction are already getting a larger deduction by using the standard deduction.

Do you want them to double-dip ?

Thats my point, I think the mortgage deduction should be in addition to the standard deduction thats why I said we need to eliminate the standard deduction and shift the tax brackets to reflect it.

05-13-2007, 07:07 PM

I'd be all for it, but I'd also benefit from it.

Diesel66 · 05-13-2007, 08:27 PM

Originally Posted by 6SpeedTA95

Thats my point, I think the mortgage deduction should be in addition to the standard deduction thats why I said we need to eliminate the standard deduction and shift the tax brackets to reflect it.

Then the middle class would pay basically no taxes and the poor/working class would get shafted again. Great plan

Possible idea is allow people to claim a portion of their rent.

6SpeedTA95 · 05-13-2007, 11:16 PM

Originally Posted by Diesel66

Then the middle class would pay basically no taxes and the poor/working class would get shafted again. Great plan

Possible idea is allow people to claim a portion of their rent.

how would the poor/working class get shafted again? The whole point of me even making this thread is so people in the middle class or lower class get a tax break for owning a home.

Diesel66 · 05-14-2007, 01:43 AM

Originally Posted by 6SpeedTA95

how would the poor/working class get shafted again? The whole point of me even making this thread is so people in the middle class or lower class get a tax break for owning a home.

And what percentage of the poor/working class owns their own home ?

Renters would be paying the portion of the middle class and rich's taxes.

6SpeedTA95 · 05-14-2007, 11:10 AM

Originally Posted by Diesel66

And what percentage of the poor/working class owns their own home ?

Renters would be paying the portion of the middle class and rich's taxes.

Why would renters be paying their portion of the taxes?

DosEquis · 05-14-2007, 03:56 PM

I think it is fair the way it is. The standard deduction is supposed to make it fair for those who rent as they also have a cost to pay to live some place. Instead of an account to the bank they have the payment to the landlord.

I think it is fair to choose between one or the other. If they were not going to hit the 10k standard, they just got helped out anyway by being able to deduct more.

Diesel66 · 05-15-2007, 01:37 AM

Originally Posted by 6SpeedTA95

Why would renters be paying their portion of the taxes?

Because the federal govt would still be expecting the same amount of total taxes and you are giving more deductions to the middle class and rich.

Who wouldnt get the extra deduction ? the renters.
Which economic group is most likely to be renting ? the poor/working class.

7th Ninjai · 05-15-2007, 08:10 AM

I'm more in favor of getting rid of our income tax code altogether. It's so complicated that no one truly understands it. You can take your taxes to 10 different accountants and get 10 different answers.

6SpeedTA95 · 05-15-2007, 08:16 AM

Originally Posted by Diesel66

Because the federal govt would still be expecting the same amount of total taxes and you are giving more deductions to the middle class and rich.

Who wouldnt get the extra deduction ? the renters.
Which economic group is most likely to be renting ? the poor/working class.

Again, they do not pay MORE in taxes. That is why I specifically said shift the brackets up to reflect the difference.

Diesel66 · 05-15-2007, 12:32 PM

Originally Posted by 6SpeedTA95

Again, they do not pay MORE in taxes. That is why I specifically said shift the brackets up to reflect the difference.

Then what would be the point of more tax deductions ?

Cut the total taxes collected and rip out a large chunk of the tax code. You dont need thousands of pages of code if the top % is 10% and the average person is paying 2-4%.