patrick.net

HeadSet says

floki says

HELOCs: spend the equity now tax free

You cannot "spend equity" unless you sell. You did not pull equity just because the house was collateral; you merely got a loan that must be paid back with interest and likely had closing costs. No different that claiming a "tax free signature loan" or claiming "unused wallet equity" with the remaining balance on your credit cards. Loans are always "tax free."

Hmm, HeadSet, signing up for HELOC(s) does not require selling or refinancing as long as total loan to value ratio is up to about 75-80%, which is the equity in question. I'm in CA so I don't know if it's different elsewhere. And the holder of that credit line becomes secondary lienholder of that property,
as you say.

My point about it being tax free is, that credit line (the borrowed equity) is not taxed, i.e it is not an income but it is still money to be spent. Yes, it is a debt collateralized by the home that must be repaid with interests of course.

Even better would be cashout refinance plus HELOCs, all tax free! During bull market conditions people made a killing flipping with this strategy, especially in CA because of crazy amount of equity.

So we can add cash out as another possible loophole to IRA financed property.

Patrick says

FortWayneHatesRealtors says

Markets doubled last 5 years, it’s all inflation.

Note that this pushes people into higher tax brackets, increasing government revenue.

So government directly benefits from inflation. The people lose.

This is why we need real metal silver by weight as currency, not "dollars" or other bullshit that can be redefined to be a smaller weight of silver.

Call it "The Pound" and make it literally one pound of pure silver. Inflation would end overnight, and the people would have the power to preserve their earnings.

That’s what convention of states is for. To force balanced budgets. They print away inflation, Trump does too. It’s insanity.

If the stock market rise is "all inflation", then your only defense against inflation is investing in the stock market.

But, I'm wondering just how the rise in price of a dozen eggs hurts me while my net worth rose millions in 5 years?

clambo says

If the stock market rise is "all inflation", then your only defense against inflation is investing in the stock market.

Yes, stocks, like housing, are a "hedge" against inflation. The fly in the ointment though is if a revenue hungry future government decides to tax unrealized capital gains as well as dividends and interest.

HeadSet says

Yes, stocks, like housing, are a "hedge" against inflation. The fly in the ointment though is if a revenue hungry future government decides to tax unrealized capital gains as well as dividends and interest

As long as they start with their own pension plans, the plebs won't mind.

HeadSet says

clambo says

If the stock market rise is "all inflation", then your only defense against inflation is investing in the stock market.

Yes, stocks, like housing, are a "hedge" against inflation. The fly in the ointment though is if a revenue hungry future government decides to tax unrealized capital gains as well as dividends and interest.

The probability of this happening is less than aliens arriving to the Earth tomorrow and giving everybody an anal probe. As in: find something better to worry about.

Trump was ahead of me on this! I suggested it on the 8th (see date on this post) but on the 7th he had already proposed it:

https://www.coffeeandcovid.com/p/the-hard-way-saturday-january-10

On Wednesday, Politico ran an unintentionally encouraging story headlined, “Trump team drafting executive order on affordability.” According to people familiar with document, “The White House is drafting an executive order targeted at frustration with the cost of living, including allowing people to dip into their retirement and college savings accounts for down payments on homes.”

Senator Josh Hawley (R-Mo.) explained the elegant logic in allowing Americans to use their own retirement savings to fund home purchases. “For years, Wall Street has used your 401k money to buy single-family homes,” Hawley tweeted. “We should ban them from doing it - but allow you to use your 401k to help you buy a home, without penalties or caps or taxes.”

https://www.politico.com/news/2026/01/07/trump-team-executive-order-affordability-00715643

Patrick says

allowing people to dip into their retirement and college savings accounts for down payments on homes.”

People have long been allowed to withdraw IRA money penalty free to buy a first house for themselves or certain relatives. Was limited to $10k though.

Patrick says

Trump was ahead of me on this! I suggested it on the 8th (see date on this post) but on the 7th he had already proposed it:

https://www.coffeeandcovid.com/p/the-hard-way-saturday-january-10

On Wednesday, Politico ran an unintentionally encouraging story headlined, “Trump team drafting executive order on affordability.” According to people familiar with document, “The White House is drafting an executive order targeted at frustration with the cost of living, including allowing people to dip into their retirement and college savings accounts for down payments on homes.”

Senator Josh Hawley (R-Mo.) explained the elegant logic in allowing Americans to use their own retirement savings to fund home purchases. “For years, Wall Street has used your 401k money to buy single-family homes,” Hawley tweeted. “We should ban them from doing it - but allow you to use your 401k to help you buy a home, without penalties or caps or taxes.”

https://www.politico.com/news/2026/01/07/trump-team-executive-order-affordability-00715643

The "without penalty or caps" part sounds easy enough to implement but I find the "without tax" part impossible to do without screwing the owner somehow, as govs always do. Let's say a scheme in which fed and state gov owning some percentage of shares in the property in perpetuity plus various restrictions etc...

Why? Seems easy enough to me.

Though I do think there should be the restrictions that it should be a first house, and if you sell it, you have to put the money back in the 401(k) or in a next house.

The primary goal is family formation, and the secondary is to prevent just blowing the money.

Welcome to being an adult. You want your 401k money for your first house, take it. There are already laws in place that allow it, but don't think you don't have to contribute to society. I had to pay my $100k tax bill to get at my 401k for my first house. Life isn't free.

Government needs to stop propping house prices with fed backed mortgages. That’ll make housing affordable again.

The less options people get to fuck with their retirement plans the better off they will be when that retirement finally comes.

RWSGFY says

The less options people get to fuck with their retirement plans the better off they will be when that retirement finally comes.

Yep, seems like every option suggested always comes to throwing more money at the industry to absorb.

True, even letting people use their own money to buy a house is yet another boost to the demand side, not the supply side.

I think it's the best of the demand-side answers, but the best answer is to build more housing where the jobs are.

Patrick says

Why? Seems easy enough to me.

Though I do think there should be the restrictions that it should be a first house, and if you sell it, you have to put the money back in the 401(k) or in a next house.

The primary goal is family formation, and the secondary is to prevent just blowing the money.

Because living in it would be tax free and I find it difficult for the govs to allow anything tax free without screwing the owner somehow, no matter how right the goals you listed are.

Not entirely tax-free, because there would still be property tax, and probably state income tax on the 401(k) withdrawal.

And ultimately, the sale of the house (or the 401(k) money re-deposit) would be income subject to federal income tax. Though there is a $500K exclusion on that at the moment.

It seems reasonable to me to allow tax-free withdrawals to buy a house. There is already a tax deduction for mortgage interest.

FortWayneHatesRealtors says

RWSGFY says

The less options people get to fuck with their retirement plans the better off they will be when that retirement finally comes.

Yep, seems like every option suggested always comes to throwing more money at the industry to absorb.

So what? This is the socialism you all so despise. Suddenly it's a good thing just because of the lowest common denominator? There should be an option to take the money out at the minimum without penalties. I thought people here are against taxes, and the penalty is simply an enrichment scheme for the government to keep the ponzi going. Trump should go further and allow it for any/most reasons

Patrick says

There is already a tax deduction for mortgage interest.

Yes, an abomination that helps inflate house prices, but no benefit tax wise to lower-middle earners. Most folks outside of California do not pay enough mortgage interest to beat the standard deduction. Even a $500k mortgage at 6% barely exceeds the $32,200 standard deduction, and not at all after a few years when the std deduct increases and the interest paid decreases.

True, the mortgage interest deduction is a scam. Prices are all adjusted upward to take it into account.

The winners are the banks, which get more interest because there are bigger loans, and boomers, who get the boosted house price.

The losers are young couples who want to buy a house to start a family.

Patrick says

Not entirely tax-free, because there would still be property tax, and probably state income tax on the 401(k) withdrawal.

And ultimately, the sale of the house (or the 401(k) money re-deposit) would be income subject to federal income tax. Though there is a $500K exclusion on that at the moment.

It seems reasonable to me to allow tax-free withdrawals to buy a house. There is already a tax deduction for mortgage interest.

Sure, these existing tax laws such as property taxes, taxes on future distributions, sales proceeds going back to IRA etc.... are well established but that is not the use tax I'm referring to. Living in the home financed with tax deferred money is the 'using it tax free part' I'm referring, and I don't see govs allowing that without getting a piece of it somehow.

Also, mortgage interests deductions are allowed because the interests were paid with POST tax money. But it only has the effect of reducing gross taxable income by the amount of interest and even then, only reduces a small portion of the overall income tax liability, not the entirety of the interests amount. But the 'living in the home case as being tax free use' as I'm putting it, would be akin to deducting 100% of the taxes on the amount used to buy while living in it because no taxes have been paid yet. This is why the current law does not permit living in a IRA financed investment property.

There is only really one way to make FULL use of that IRA/401K tax deferred money as you well know, that is to distribute it and paying the full taxes owed. The net proceeds can then be used without any future restrictions, FULL use. But your proposal is closer in practice to other methods such as loans, IRA financed property, trading in IRA, etc... and they all come with tax and use related restrictions. For example we can use IRA to buy/sell stocks (akin to buying a property) but cannot use the proceeds to rent a property (the living in the home part) unless it's a distribution.

mell says

FortWayneHatesRealtors says

RWSGFY says

The less options people get to fuck with their retirement plans the better off they will be when that retirement finally comes.

Yep, seems like every option suggested always comes to throwing more money at the industry to absorb.

So what? This is the socialism you all so despise. Suddenly it's a good thing just because of the lowest common denominator? There should be an option to take the money out at the minimum without penalties. I thought people here are against taxes, and the penalty is simply an enrichment scheme for the government to keep the ponzi going. Trump should go further and allow it for any/most reasons

Exactly mell ! That damn 10% penalty is shit, needs to be gone at the very least regardless of reason for distributions.

HeadSet says

Patrick says

allow tax-free 401(k)/IRA withdrawals by married couples to spend on their first house

That will raise prices of first homes. A minimum 20% down on loans would bring prices back to actual affordability.

Nothing trumps build baby build.

Part of the challanage is that younger workforce members have little saved in their 401k. Even if they can take cash out, without penalty, there isn't that much of a nest egg to draw from, even if an employer matches some of their contributions.

Enough with the games. The 401k was a solution for a different problem. Now we want to use the 401k to solve another problem. Enough with the games.

BUILD BABY BUILD!!!!!!!

Patrick says

True, the mortgage interest deduction is a scam. Prices are all adjusted upward to take it into account.

The winners are the banks, which get more interest because there are bigger loans, and boomers, who get the boosted house price.

The losers are young couples who want to buy a house to start a family.

Most young and some older folks I've talked to mistakenly believe interests deduction as being the total interests paid deducted from the taxes. They are surprised to learn that it's not. Makes me wonder how many people like that help push the bid prices up.

Many times I've had the thought that living near people who don't think things through is exepensive.

They overpay, and that raises prices for me.

GreaterNYCDude says

Part of the challanage is that younger workforce members have little saved in their 401k. Even if they can take cash out, without penalty, there isn't that much of a nest egg to draw from, even if an employer matches some of their contributions.

True, it's not that much for the young. It's something though.

GNL says

BUILD BABY BUILD!!!!!!!

Yes, the best solution is to increase supply, not demand.

floki says

mortgage interests deductions are allowed because the interests were paid with POST tax money

No, mortgage deductions are a holdover from the times when all interest was deductible. The mortgage interest was kept deductible to encourage home ownership. If "POST tax" money was the issue, then credit card interest and personal loan interest would still be deductible.

FortWayneHatesRealtors says

You should have seen his housing announcement today. Prices will be going up.

He’s a builder, his friends are builders. Their business lives on asset inflation.

Want to make yourself and your friends rich beyond your wildest dreams? Simply get tons of assets under your control, preferably using OPM/Debt baby Debt, and then limit the supply to everyone else.

PROFITS TO THE MOOM BABY.

Patrick says

Booger says

Why don't you just leave California instead?

Been here since 1997, so most people I know are here.

It's kinda hard to go somewhere new where you don't know anyone.

All your friends are online bro. :)

Patrick says

Yes, the best solution is to increase supply, not demand.

Yes, increase supply of starter homes (difficult). But attack demand for overpriced homes by deporting illegals and cut off the easy money spigots.

HeadSet says

floki says

mortgage interests deductions are allowed because the interests were paid with POST tax money

No, mortgage deductions are a holdover from the times when all interest was deductible. The mortgage interest was kept deductible to encourage home ownership. If "POST tax" money was the issue, then credit card interest and personal loan interest would still be deductible.

My bad HeadSet, I assumed the encouragement part didn't need to be said but yes ! The post tax reason is another according to tax people I've dealt with.

GNL says

All your friends are online bro. :)

I enjoy the online chatting, but also meeting people in real life, which I do as often as I can.

CA is beautiful (can't beat nature plus climate, and wine) and had my work hard play hard decades there, but I have been trying to convince the rest of the immediate family to move. That being said, there aren't many states with low taxes, but have been eying NH. Savings would be tremendous and tax money not spent cannot be abused.

https://www.the-independent.com/news/world/americas/us-politics/trump-affordability-retirement-account-down-payment-b2897010.html

But anything that makes housing more expensive, like this proposal, is a bad idea.

At least we got foreclosures restarted!

HeadSet says

floki says

mortgage interests deductions are allowed because the interests were paid with POST tax money

No, mortgage deductions are a holdover from the times when all interest was deductible. The mortgage interest was kept deductible to encourage home ownership. If "POST tax" money was the issue, then credit card interest and personal loan interest would still be deductible.

Interest earned on savings accounts used to be free too - Nixon put an end to that.

mell says

FortWayneHatesRealtors says

RWSGFY says

The less options people get to fuck with their retirement plans the better off they will be when that retirement finally comes.

Yep, seems like every option suggested always comes to throwing more money at the industry to absorb.

So what? This is the socialism you all so despise. Suddenly it's a good thing just because of the lowest common denominator? There should be an option to take the money out at the minimum without penalties. I thought people here are against taxes, and the penalty is simply an enrichment scheme for the government to keep the ponzi going. Trump should go further and allow it for any/most reasons

What exactly is socialism here? In socialist countries you don't even have any kind of private retirement savings accounts - your taxes are taken from your salary and you get your pension when you reach the pension age. Have words lost all meaning?

Eric_Holder says

mell says

FortWayneHatesRealtors says

RWSGFY says

The less options people get to fuck with their retirement plans the better off they will be when that retirement finally comes.

Yep, seems like every option suggested always comes to throwing more money at the industry to absorb.

So what? This is the socialism you all so despise. Suddenly it's a good thing just because of the lowest common denominator? There should be an option to take the money out at the minimum without penalties. I thought people here are against taxes, and the penalty is simply an enrichment scheme for the government to keep the ponzi going. Trump should go further and allow it for any/most reasons

What exactly is socialism here? In socialist countries you don't even have any kind of private retirement savings accounts - your taxes are taken from your salary and you get your pension when you reach the pension age. Have words lost all meaning?

LOL, in a socialist country Patrick would still be going to work every day instead of agonizing over whether or not it was a mistake to contribute to 401k so much.