Hopefully the primary residence and vacation Home Mortgage Deduction will be phased out completely. Interest should be deductible only as a business expense (property bought to rent or flip), never for personal consumption.

HeadSet says

Hopefully the primary residence and vacation Home Mortgage Deduction will be phased out completely. Interest should be deductible only as a business expense (property bought to rent or flip), never for personal consumption.

How do you propose to differentiate between "flippers" and "consumers"?

Patrick says

Beginning in 2018, the deduction for interest paid on a home equity line of credit (“HELOC”) will no longer be eligible for the home mortgage interest deduction.

This is where people who's houses really appreciated, like in CA, will get spanked the worst. Those who tapped into their equity for college, trips, new play toys, new pools, etc. will find that they no longer can deduct that interest.

Sniper says

Patrick says

Beginning in 2018, the deduction for interest paid on a home equity line of credit (“HELOC”) will no longer be eligible for the home mortgage interest deduction.

This is where people who's houses really appreciated, like in CA, will get spanked the worst. Those who tapped into their equity for college, trips, new play toys, new pools, etc. will find that they no longer can deduct that interest.

Yup, those of us levered way up at 0-3%, using OPM to bag triples doubles and homers, are going to get slaughtered by losing a small tax break. Lol

The new tax laws will be a negative for homeowners in some states. It still won't stop the price appreciation of homes.

So this only impacts properties over a million in LA lol.

Satoshi_Nakamoto says

HeadSet says

Hopefully the primary residence and vacation Home Mortgage Deduction will be phased out completely. Interest should be deductible only as a business expense (property bought to rent or flip), never for personal consumption.

How do you propose to differentiate between "flippers" and "consumers"?

Primary Residence -> tax deduction
Not Primary Residence -> no tax deduction

Sniper says

Patrick says

Beginning in 2018, the deduction for interest paid on a home equity line of credit (“HELOC”) will no longer be eligible for the home mortgage interest deduction.

This is where people who's houses really appreciated, like in CA, will get spanked the worst. Those who tapped into their equity for college, trips, new play toys, new pools, etc. will find that they no longer can deduct that interest.

In CA most of it was cancelled out by AMT anyway.

Feux Follets says

•About 18 million taxpayers are expected to itemize in 2018. That's down from 46.5 million last year.

Gee look at that, I said that in this other thread, stating that will save me money, but some "experts" here (and I use that term very loosely) claimed I wouldn't be saving money. Looks like many more MILLIONS understand that point too.

http://patrick.net/post/1315197/2018-04-11-the-truth-about-the-tax-cut

Also missing from this article link:

Feux Follets says

https://www.cnbc.com/2018/04/23/tax-bill-will-slash-the-number-of-homeowners-claiming-the-mortgage-deduction.html

...."The anticipated drop is largely due to the near-doubling of the standard deduction that took effect Jan. 1 under the new tax law. Fewer taxpayers are expected to itemize their deductions, which is the only way to take advantage of the tax break for interest paid on mortgages. For example, married couples filing jointly now get a standard deduction of $24,000, up from $12,700 last year. "

You also get a BIGGER deduction taking the Standard Deduction versus itemizing actual expenses, if your expenses are less than the $24K. (Hint, that actually puts money IN your pocket, versus spending it.)

Too bad those "experts" here don't understand what a Schedule A actually is.

Sniper says

claimed I wouldn't be saving money.

Who claimed you wouldn't be saving money? Wasn't me.

Sniper says

(Hint, that actually puts money IN your pocket, versus spending it.)

No it doesn't necessarily. You're just not spending it and getting a percentage of that not spent money back with the new standard deduction. It's not a dollar for dollar savings.

Not spending money is not spending money. It's not a savings. Getting an additional $9k DEDUCTION will maybe save you $1,500 for someone pulling in $175k under the new tax plan. If $1,500 is a big deal to you that's fine. It's not to most that make money. Yes, it's a savings of course. I don't recall anyone in that thread saying you wouldn't save. It's just not $8-10k as claimed. That's just the difference in the deduction and not an actual savings. You have to reference that deduction with your effective tax rate to get the ACTUAL savings. Probably $1,500 or less.

Also, based on your $15k itemization number in that thread, you either don't make money, don't own a property or have the property paid off in NJ. Congrats if the property is paid off, which is the only logical explanation to ONLY be itemizing $15k. My state income tax rate was lower in IL and my state income tax paid was over $15k here in IL, which I itemized on my Schedule A for 2017 taxes. I then itemized mortgage interest. Then property taxes. Then charity/donations. Surprisingly, all this was done on my schedule A. I almost accidentally put it on my schedule Y. Thank god I didn't do that! I'm like caveman. I don't know how to do taxes. Deductions are money in me pocket. Goo goo ga ga.

Patrick says

As a result of doubling the standard deduction to $12,000 for single filers and $24,000 for married filing jointly, according to Moody’s Analytics, as many as 38 million Americans who would otherwise itemize may instead choose the higher standard deduction under the new tax plan. The doubling of the standard interest deduction, in essence, removes a tax incentive of moving from renting a home to home ownership and a likely outcome will be fewer Americans choosing to become homeowners versus renters solely for the tax advantages.

Absurd. Median first time home buyer 180k. With 20% down 144k mortgage or 5k a year interest on the biggest year. If you had enough property taxes and local income taxes to actually itemize you would save something like 1800 on your taxes or 150 a month. People with 200 cable bills are giving up home ownership for 150 a month? Beyond absurd.

The article was written by an ASPEN realtor for christ sakes. A tax incentive for moving from renting to home ownership in Aspen? ROFLOL.

I see a lot of tax accountants getting laid off.

Thank You Landlord for our happy childhood!

"war is peace
freedom is slavery
ignorance is strength"

And remember, renting is not debt!

bob2356 says

Patrick says

As a result of doubling the standard deduction to $12,000 for single filers and $24,000 for married filing jointly, according to Moody’s Analytics, as many as 38 million Americans who would otherwise itemize may instead choose the higher standard deduction under the new tax plan. The doubling of the standard interest deduction, in essence, removes a tax incentive of moving from renting a home to home ownership and a likely outcome will be fewer Americans choosing to become homeowners versus renters solely for the tax advantages.

Absurd. Median first time home buyer 180k. With 20% down 144k mortgage or 5k a year interest on the biggest year. If you had enough property taxes and local income taxes to actually itemize you would save something like 1800 on your taxes or 150 a month. People with 200 cable bills are giving up home ownership for 150 a month? Beyond absurd.

The article was written by an ASP...

Great! Remove the deduction altogether then. It's crony socialism anyways. Have a flat tax on everything and one flat deduction. Or none. We agree.

Satoshi_Nakamoto says

How do you propose to differentiate between "flippers" and "consumers"?

One easy way is to require the homes flipped or otherwise acquired/sold as an investment vs consumption be purchased in the name of a registered business entity, like an LLC.

LLC's can't get standard mortgages available to individuals, I believe.

Sniper says

This is where people who's houses really appreciated, like in CA, will get spanked the worst. Those who tapped into their equity for college, trips, new play toys, new pools, etc. will find that they no longer can deduct that interest.

Not just appreciated, but just have such easy access to those kinds of lending services as well. In Texas, it is not nearly so easy to re-fi a home like in California. That is because Texas law limits it.

Oh, and Texas has way more affordable housing despite having a huge influx of people every year, too.

WookieMan says

Not spending money is not spending money. It's not a savings.

Have to call you out there. 'Savings' as an economic term IS defined as 'income not spent, or deferred consumption '.

mell says

Great! Remove the deduction altogether then. It's crony socialism anyways. Have a flat tax on everything and one flat deduction. Or none. We agree.

Not sure how this relates to first time home buyers. I don't agree with a flat tax. A lot less tax brackets and cleaned up tax code yes, flat tax no. The very wealthy would not have become very wealthy (at least those that didn't inherit) without the benefits provided by the government no matter how much they try to sell this self made man crap. Educated work force, a system of law, infrastructure, safe from war, etc., etc., etc. The people who have made a greater gain have a greater obligation.

WarrenTheApe says

'Savings' as an economic term IS defined as 'income not spent, or deferred consumption '.

That's fine. I don't want to rehash the whole thing here, but I was really arguing the amount of claimed savings. Not that there was NO savings. There will be savings for most with the new tax plan, I've never denied that, though it has been presented that way.

If I misrepresented the textbook definition of savings, my apologies. The claim of $9k of savings versus the reality of the situation in my previous conversation is what I was addressing. I'll still stand by my statement though, not spending money is not spending money. If you made the same amount every year and all your spending went to your living expenses, I'm not sure how you're saving anything. You're not spending because you don't have the money, not saving. Fact is, this is how most Americans live.

The dictionary has been in flux ever since Kennedy took office.
No apology necessary...

WookieMan says

If I misrepresented the textbook definition of savings, my apologies.

WookieMan says

There will be savings borrowing for most with the new tax plan

There fixed it for you. No one is saving anything. The money is all borrowed.

bob2356 says

The very wealthy would not have become very wealthy (at least those that didn't inherit) without the benefits provided by the government no matter how much they try to sell this self made man crap. Educated work force, a system of law, infrastructure, safe from war, etc., etc., etc. The people who have made a greater gain have a greater obligation.

That would assume that they got a "greater" use of those same public services. Did they? how do you know?

WookieMan says

The claim of $9k of savings versus the reality of the situation in my previous conversation is what I was addressing. I'll still stand by my statement though, not spending money is not spending money. If you made the same amount every year and all your spending went to your living expenses, I'm not sure how you're saving anything.

Still totally missing the concept and don't understand the point.

If you've been spending actual dollars for decades, and listing those dollars spent and getting a deduction for those dollars on (Sch. A), now next year, you DON'T spend those dollars but still get to take the deduction as if you spent them, that is calling "saving money" out of pocket.

Not sure how much more simple that can be explained.

Goran_K says

bob2356 says

The very wealthy would not have become very wealthy (at least those that didn't inherit) without the benefits provided by the government no matter how much they try to sell this self made man crap. Educated work force, a system of law, infrastructure, safe from war, etc., etc., etc. The people who have made a greater gain have a greater obligation.

That would assume that they got a "greater" use of those same public services. Did they? how do you know?

It's simple a flat tax is the fair solution paired with no or minimal deduction. Specialized deductions are favoritism, crony socialism or crony capitalism whatever you want to call it. Remove those and introduce a low flat tax. He was basically arguing for a flat tax and the removal of deductions by arguing the wealthy got special incentives/deductions.

It should have been scrapped the very minute those tax breaks were being used to manipulate, push and hold artificially inflated Real Estate prices.
Ideally the median home price should be right at that cap.

Sniper says

If you've been spending actual dollars for decades, and listing those dollars spent and getting a deduction for those dollars on (Sch. A), now next year, you DON'T spend those dollars but still get to take the deduction as if you spent them, that is calling "saving money" out of pocket.

I have never claimed their won't be savings. There will be savings, for most at least. Itemizing $15k in the past, but now using the new standard deduction is not an actual $9k savings. It's a $9k reduction of gross INCOME that can be taxed federally.

You'd be better off describing what is ACTUALLY happening. You didn't SPEND $9k on deductible items by your own admission (only $15k for FY 2017), so you then had to use the standard deduction in 2018 of $24k (hypothetically), so you'll SAVE about $1,000-$1,500 in taxes owed because your gross income is REDUCED (not saved) by $9,000.

You weren't going to spend another $9k and you would be stupid to with the new standard deduction unless it was for business purposes or you purchased a home with a larger mortgage. So you're not actually saving $9k in real dollars. THIS is what I'm getting at.

Saving $9k would be not paying $9k in federal taxes. Your original assertion was that you estimated $8-10k in savings. To get $9k in federal tax savings you'd have to itemize a shitload and well, that's not saving anything based on you saying you itemized $15k.

You can mention schedule A until you're blue in the face as well. I've itemized since I've been 21, so I'm fully aware of what it is and have filed my own taxes since I was in high school.

State and local taxes (referred to collectively as “SALT”) can be deducted but will no longer be unlimited as under current tax law.

Why do so many people get this wrong? Oh well. Please see the "Personal Exemption Phaseout" or "PEP" or "Pease." In 2017 tax year, the phaseout of itemized exemptions started when you AGI reached $261k (single) and has limited your itimized exemptions to a total of $4050 by the time you reach $384k.

https://www.forbes.com/sites/kellyphillipserb/2016/10/25/irs-announces-2017-tax-rates-standard-deductions-exemption-amounts-and-more/#67ae58e25701

"Pease limitations apply to charitable donations, the home mortgage interest deduction, state and local tax deductions and miscellaneous itemized deductions."

Goran_K says

That would assume that they got a "greater" use of those same public services. Did they? how do you know?

They would have not been able to build and maintain great personal wealth without them. How wealthy would theil, zuckerburg and bezos be today if the government had not funded ARPANET? How about feinburg, mnuchin, adelson without a financial/banking system that is kept relatively honest and a legal system that is stable and honest? Do you think they would have done as well in Argentina or some other place where the banking/legal systems are a shambles and the government can grab your money at any time? If the federal goverment hadn't funded mercer's work at IBM he would have never been recruited by renaissance. The pharma industry without all the governmet funded basic research? A big chunk of the military is used for protecting US business interests. Even the koch bro's owe the fortune they inherited from their father to government funding. But it was stalin and hitlers government funding though.

Yes they have made greater use of public services.

Sniper says

If you've been spending actual dollars for decades, and listing those dollars spent and getting a deduction for those dollars on (Sch. A), now next year, you DON'T spend those dollars but still get to take the deduction as if you spent them, that is calling "saving money" out of pocket.

The new tax bill means you don't have to pay interest on your mortgage, state income tax, and property tax? Happy days are here again.

SunnyvaleCA says

Why do so many people get this wrong?

Probably because of this:

SunnyvaleCA says

In 2017 tax year, the phaseout of itemized exemptions started when you AGI reached $261k (single) and has limited your itimized exemptions to a total of $4050 by the time you reach $384k.

Not a whole lot of single people make $261k to even get to the start of the phase out. So there's probably just less understanding around it given probably less then 2% of individuals make this much & they most likely will have an accountant do the work. So those people probably don't even know about it either.

Plus it's based on AGI and not a straight cap of $10K on deductions (state & property). There are a LOT of people with $10k plus of property taxes and state income taxes. So more people are looking into it and probably didn't realize there was something somewhat similar in prior years. In states like IL, CA, NY & NJ a lot of people make less then the $261k on an individual basis, but will be hit by the $10k cap. That's my guess why people don't know about the phaseout. Well previous phaseout.