Support NeoGAF

[kmfdmpig]

The average US home is ~$200k

https://www.zillow.com/home-values/

More than $500k, while normal in very expensive areas, is not the norm in the country.

Also, someone that bought a $600k home would still be able to deduct most of the interest on it if they capped the deduction at $500k, right? They'd only lose that deduction for 1/6th of the mortgage interest paid, I believe.

 

[UraMallas]

That's the one thing that scared me about townhouses, the maintenance charges. Do you buy home owners insurance as well with townhouses?

Guessing in the ~$2k/month range total for mortgage/insurance/taxes?


I'm currently paying ~$1.5k/month, but I have to rake, mow and shovel lol.



I wonder how this affects people in our range. Do we save? Do we lose home value?

Net positive or negative?

I bought a townhome last year in Des Moines IA. I pay $160 HOA. Homeowners insurance is escrowed in to my mortgage with the taxes. $563 per month. Total payment per month is $720 on $70k wages. Lots of OT in there so I'm trying to stack my 401k this year while the gravy train is chugging along.

 

[Quixzlizx]

That's the one thing that scared me about townhouses, the maintenance charges. Do you buy home owners insurance as well with townhouses?

Guessing in the ~$2k/month range total for mortgage/insurance/taxes?


I'm currently paying ~$1.5k/month, but I have to rake, mow and shovel lol.



I wonder how this affects people in our range. Do we save? Do we lose home value?

Net positive or negative?

I do have to get homeowners' insurance, but it's less than $500 a year, since I don't need coverage for the structure of the building.

A bit over $2k/mo including the the above plus the maintenance charges and oil/elec/telecom.

I'd say it wouldn't affect us too much considering our places are way below the $500k threshold, but it might depress our home values a bit as the $500k+ market in our area slumps.

 

[Jenov]

As long as the proceeds arent being used to funnel them back up to the 1%, then it's good. They should double the standard deduction and significantly scale back the mortgage deduction. But we know how evil this administration is, so Trump would slash the mortgage deduction to line his own pockets, do nothing to the standard deduction, and end up hurting the upper middle class only.

 

[trembli0s]

This is not a one shoe fits all problem, as different cities have different capabilities in terms of public transit and different levels of density. West coast cities, for example, are less dense, have relatively poor public transit (making people more likely to be car dependent), and have urban growth boundaries, which makes all housing, regardless if it is single home, townhouse, or condo/apartment extremely expensive.

In this area of the country (seattle for example), 500k affords you a 2 bedroom condo in the city and 750k a 700 sq ft bungalow.

That's a problem of local politics. The vast majority of the country would not have issues with the proposed 500K target.

If you want to bitch about Nimbyism in progressive cities, go right ahead but don't act like the rest of the country isn't subsidizing wealthy homeowners in cities that won't adopt higher density construction for living.

 

[johnny956]

That's a problem of local politics. The vast majority of the country would not have issues with the proposed 500K target.

If you want to bitch about Nimbyism in progressive cities, go right ahead but don't act like the rest of the country isn't subsidizing wealthy homeowners in cities that won't adopt higher density construction for living.

Yup currently the mortgage deduction favors higher priced homes and single filers with the standard deduction being $6300. We don't use the mortgage deduction as a married couple the standard deduction at $12600 which is high enough that itemizing my deductions isn't worth it. I think the first year we bought the house we got close but that's been it

 

[AndyD]

Yeah, isn't this one of those economists think would be beneficial to get rid off in the long term, but is very popular and touching it is the political equivalent shoving your head down a meat grinder?

Pretty much. Not a bad idea. It's still disproportionate as real estate value varies so much but it's better than nothing.
Investments and donations next!

 

[Instro]

Rather than a flat nationwide value, wouldn't it make more sense to consider it by local/state median values? Otherwise I have no problem with this.

 

[sflufan]

As someone who favors the complete and total elimination of the mortgage interest deduction and its resultant market-distorting effects, I pray to Odin that this becomes a reality!

 

[zashga]

This would predominantly hurt homeowners in and around big cities, who already hate Trump. This seems too smart for him to have come up with himself.

Kinda doubt republicans will actually go along with this, but I've also been surprised how spineless they've been this year. Who knows at this point.

 

[xfactor99]

This is like removing the tax exclusion on health benefits. It's a good idea that has no chance of happening, as it is basically a political third rail.

 

[SoRuffShoNuff]

If you have a mortgage over 500K, it's very unlikely that you're middle class.

Of course it hurts them because a subsidy is being taken away for the value from 501K->1M. But why would you want to be subsidizing homes of that value anyway?

Ummm hello Atlanta real estate market. The home we are having built is a little over 500k and we are firmly middle class.

Crazy thing is this would hurt a lot of the Republican voters who voted against Ossoff in the GA district 6 election.

 

[AndyD]

Rather than a flat nationwide value, wouldn't it make more sense to consider it by local/state median values? Otherwise I have no problem with this.

It's hard to enforce as there is a lot of volatility that way. County and local taxes might be able to track that, but nationally it is difficult.

 

[Ryuuroden]

This would be amazing and I would love for it to happen

 

[cwmartin]

Sounds like our renovations will stop a little short

 

[UltimaPooh]

Yeah, isn't this one of those economists think would be beneficial to get rid off in the long term, but is very popular and touching it is the political equivalent shoving your head down a meat grinder?

Yes.

It's at the top of the list.

 

[kiunchbb]

With 20% down, your house would need to be over $600k to be over the cap.

Once you past this point you should be able to afford the tax.

 

[Ron Mexico]

So literally the only time I can see a drop in the mortgage deduction with a corresponding raise of the standard deduction not working would be an environment where mortgage interest rates were off to the races a la the 1980s.

There would be a lot of variables to account for but something like the average home price at the average currently-held mortgage rate then taxed at the median homeowners' income rate compared to the same calculations for the increased standard deduction.

Theoretically, it would also simplify the tax return process as more taxpayers would no longer itemize, leading to a theoretical drop in IRS expenses so it almost makes sense from a traditional small government argument.

Skeptical about the reality of a deduction slash/standard deduction increase combo, but will be interesting to see.

 

[DaveTheSnake]

That still means only the wealthy are buying houses >$500k. They don't need government subsidy.

The entire state of California would disagree with you.

 

[kirblar]

The entire state of California would disagree with you.

The entire state of CA needs to be building less single-family homes. The interest deduction's incentives are part of the problem.

 

[Balphon]

the vast majority of tax payers don't receive the mortgage interest deduction, and many of them would see a big benefit from doubling the standard deduction instead

Probably, but the people who do benefit from the MID are going to be real vocal about anything that touches it. And the biggest beneficiaries are invariably going to be upper-income white suburbanites with outsized influence in Washington.

 

[Amibguous Cad]

Republicans are talking about raising taxes... on rich homeowners?

(sorry, if your mortgage is 500,000 you are rich).

Senate prevented Trump from making a pocket appointment to the attorney general?

McConnell and Ryan are for a clean debt ceiling increase, against the majority of their caucus?

Did McCain rip a hole in the spacetime continuum or something?

 

[Acyl]

Ugh. I agree with this but I wish they had some fucking sense and did it based on average housing cost in each state. A $500k house can be a mansion in some parts of the country (where this rule should be applied) and a condo in others (where this rule should be at a higher mortgage).

This hurts people living in high cost-of-living regions. And I was just excited about buying a house in the next few years.

 

[sflufan]

Oh, make no mistake about it - this is a Steve Bannon "fuck you" to left-leaning urban areas. But even the Bottle of Bourbon Who Became a Boy can be "right" twice a day.

Funnily enough, when the tax reform "plan" (y'know - the one page of bullet points) was released earlier this year, one of the two itemized deductions that was not going to be touched was the mortgage interest deduction.

 

[Ron Mexico]

Ugh. I agree with this but I wish they had some fucking sense and did it based on average housing cost in each state. A $500k house can be a mansion in some parts of the country (where this rule should be applied) and a condo in others (where this rule should be at a higher mortgage).

This hurts people living in high cost-of-living regions. And I was just excited about buying a house in the next few years.

I get the sentiment, but the concept of changing the deduction based on the state/local level when we're talking about taxes paid to the federal government is, well, impossible.

More realistically, this would send shockwaves through those more expensive areas which would lead to all kinds of potential chaos. Not saying those changes aren't needed. They are, but it could get ugly before starting to resolve itself.

I'm no economist, just a dude at a credit union, but even from my vantage point, this would be really interesting if it ever sees the light of day.

 

[Cat Party]

Rolling back the MID without a corresponding increase in the standard deduction is political suicide so I really hope the Republicans go for it.

 

[sflufan]

Rolling back the MID without a corresponding increase in the standard deduction is political suicide so I really hope the Republicans go for it.

The original "plan" (the one page of bullet points) was to double the standard deduction and eliminate all itemized deductions except the MID and charitable deductions.

 

[Amibguous Cad]

If you have a mortgage over 500K, it's very unlikely that you're middle class.

Of course it hurts them because a subsidy is being taken away for the value from 501K->1M. But why would you want to be subsidizing homes of that value anyway?

But if you have a mortgage between 500k and 1 mil it's very likely that you think you're middle class.

This is a major problem with fewer people owning homes; it will push us even further in the direction of a rentier economy where the wealthy exploit the majority, who are renters who will scrape by on less and less. This is currently happening in major metropolitan areas on the west and east coasts. It's more expensive to rent in many of these places for what you get than it is to buy a single family home in the interior of the country.

I think the housing subsidy should be reformed so that it discourages financial leveraging (i.e., tax breaks trail off at the higher end and are greatest as a proportion of the financed amount at the lower end). I'm not sure discouraging home ownership is something people want to actually do, as it will stratify wealth and power even further, shrinking the middle class.

No way, promoting homeownership has always been a fool's game for building a healthy middle class. The current system encourages Americans to leverage debt into one huge, undiversified investment that completely tanks everything they've worked for when home prices turn out not to inexorably increase. The vast majority of families, were it not for the tax preferences given to home ownership and mortgage deductions, would come out ahead paying rent and socking the rest of the money they'd spend on a house in a passive index fund. They would certainly be better protected against financial crash or something lowering local property values, in any case.

Subprime mortgages are only part of the issue with the 2008 crash - the other huge problem was specifically engineering a tax code that made the vast majority of middle class wealth be invested in a single, vulnerable investment.

The entire state of California would disagree with you.

Not to put too fine a point on it, but someone living in a modest house in California for 500k is wealthy. Their wealth, specifically, is living in California, with its immaculate climate, with world class cities that have unparalleled access to high paying jobs, cultural amenities, and networking effects with other talented people. Places are more expensive to live in one place or another at least partially because living in that place is better than living in another. You're not less well off if you get a studio with a 15 minute bus ride to work in San Francisco than if you get a townhouse in the suburbs and commute an hour and a half. And you don't suddenly become even more well off if you buy a McMansion in the Dallas suburbs instead. There's no such thing as "cost of living," certainly not in the housing market. There's just places that are more desirable to live, and places that are less desirable to live, and things are priced accordingly.

 

[DaveTheSnake]

The entire state of CA needs to be building less single-family homes. The interest deduction's incentives are part of the problem.

The interest deduction incentives promote home ownership. Slashing this deduction would cause a massive recession in CA, the Northeast Corridor, NY.

The median home price in CA is over $500k. SF is over $1 mil, San Jose is over $800k, LA/OC/SD well over $500k.

https://www.zillow.com/ca/home-values/

Just out of curiosity, which state do you live in?

 

[Amibguous Cad]

The interest deduction incentives promote home ownership. Slashing this deduction would cause a massive recession in CA, the Northeast Corridor, NY.

The median home price in CA is over $500k. SF is over $1 mil, San Jose is over $800k, LA/OC/SD well over $500k.

https://www.zillow.com/ca/home-values/

Just out of curiosity, which state do you live in?

I'm sorry, but if you own a 750k townhouse in San Jose, you're not high at all on my list of priorities for getting a government handout/tax deduction.

 

[tokkun]

Ugh. I agree with this but I wish they had some fucking sense and did it based on average housing cost in each state. A $500k house can be a mansion in some parts of the country (where this rule should be applied) and a condo in others (where this rule should be at a higher mortgage).

This hurts people living in high cost-of-living regions. And I was just excited about buying a house in the next few years.

The value of the deduction is factored into home prices, so if the deduction is reduced, house prices will go down. That is a good thing for people like you who want to buy in a few years.

It's only bad for people who already own a house that is worth a lot more than $500K.

The interest deduction incentives promote home ownership. Slashing this deduction would cause a massive recession in CA, the Northeast Corridor, NY.

The median home price in CA is over $500k. SF is over $1 mil, San Jose is over $800k, LA/OC/SD well over $500k.

https://www.zillow.com/ca/home-values/

Just out of curiosity, which state do you live in?

The flip side of that coin is that housing prices are out-of-reach in those areas for anyone who isn't wealthy, and the MID is only making things worse. How far should the government go to prop up the wealth of millionaires?

 

[pottymouth]

This sounds like a great plan if the goal is to screw Blue States.

 

[sangreal]

The interest deduction incentives promote home ownership. Slashing this deduction would cause a massive recession in CA, the Northeast Corridor, NY.

The median home price in CA is over $500k. SF is over $1 mil, San Jose is over $800k, LA/OC/SD well over $500k.

https://www.zillow.com/ca/home-values/

Just out of curiosity, which state do you live in?

It wasn't created to promote home ownership nor does it have a meaningful effect on it

 

[ty_hot]

You read the first 10 responses to the thread and you understand why lots of people shit vote. They cant read a single article, why would they spend more than some minutes to choose a senator or president? Its not like "ops sorry, misread" its much more like "i just want to pretend that im informed and will make my mind based on the headline... And only the headline". Oooopa sry guys completely misunderstood everything.

 

[kirblar]

The interest deduction incentives promote home ownership. Slashing this deduction would cause a massive recession in CA, the Northeast Corridor, NY.

The median home price in CA is over $500k. SF is over $1 mil, San Jose is over $800k, LA/OC/SD well over $500k.

https://www.zillow.com/ca/home-values/

Just out of curiosity, which state do you live in?

I live in Northern Virginia. Our house prices are very high. Slashing the deduction to cap at $500K instead of $1M will not cause a recession. If you are making enough money to have a house that expensive, you are likely able to cushion the blow if the update to the standard deduction doesn't cover the difference because you have to be making a hell of a lot in the first place to afford a mortgage that large.

It wasn't created to promote home ownership nor does it have a meaningful effect on it

Exactly. This is not something that marginally allows people to get a mortgage who otherwise couldn't. It's a handout to homeowners designed to encourage people to buy instead of rent (and those efforts have turned out to be highly problematic.)

 

[Iksenpets]

The mortgage interest deduction is one of the dumbest things in our tax code. It gives back more the wealthier you are and the more highly leveraged you are, managing to be both regressive and to encourage reckless borrowing. It should absolutely go. But it shouldn't go for the sake of a tax cut for the rich.

 

[kirblar]

The mortgage interest deduction is one of the dumbest things in our tax code. It gives back more the wealthier you are and the more highly leveraged you are, managing to be both regressive and to encourage reckless borrowing. It should absolutely go. But it shouldn't go for the sake of a tax cut for the rich.

It shouldn't, but if they insist on pairing them, it's a positive in that we can keep the former while removing the latter when we eventually regain control of congress.

 

[Nipo]

No way this passes. The NAR is the largest lobbying group in the country by far. The numbers are craze and it is something like bigger than the next 5 groups combined. They'll fight tooth and nail to keep mortgage interest deduction as it is.

 

[leroidys]

I'm all for this, but not if we're just using the extra revenue to make up for repealing the estate tax or whatever other giveaway to millionaires they're trying to push through.

 

[SlimySnake]

500k is going to fuck over a lot of middle class people living in the big cities like NYC, LA, Miami, Chicago.

While people in the midwest, south and rural areas are going to reap the benefits.

In short this is going to hurt democrats.

 

[riotous]

Wouldn't rents go up because of this?

A lot of apartment buildings must have $500k + mortgages; if landlords can't deduct as much they'll make up for it by hiking rents.

 

[sflufan]

Wouldn't rents go up because of this?

A lot of apartment buildings must have $500k + mortgages; if landlords can't deduct as much they'll make up for it by hiking rents.

The mortgage interest deductions for businesses will remain unaffected by this policy.

 

[pigeon]

If Trump could be convinced to cut this deduction and the employer-provided health insurance deduction it would be just about the best thing in the world.

These are both terrible regressive policies with negative effects that would be extremely unpopular to get rid of.

 

[sflufan]

It's a handout to homeowners designed to encourage people to buy instead of rent (and those efforts have turned out to be highly problematic.)

Even worse, it's effectively a handout to the residential home construction industry.

(I'm a NoVA resident as well!)

 

[tokkun]

Wouldn't rents go up because of this?

A lot of apartment buildings must have $500k + mortgages; if landlords can't deduct as much they'll make up for it by hiking rents.

The mortgage interest deduction only applies to your primary or secondary home. The secondary home part is one of the reasons most of the money goes to rich people.

 

[Hydrus]

Man, I cant believe I'm saying this, but please Trump make this happen. This would help lower homes and may actually help prevent another housing market collapse and recession. This would help so many people and I might be able to actually afford a home. But, This is too good to be true and wont happen.

 

[cakely]

The entire state of California would disagree with you.

I haven't looked at the statistics but I would guess that the majority of people in California don't have mortgages ... they rent.

 

[FStubbs]

I still have a problem with it if the idea is basically redistributing money from the upper middle class to the rich.

 

[riotous]

sflufan / tokkun : Thanks!

 

[trembli0s]

The interest deduction incentives promote home ownership. Slashing this deduction would cause a massive recession in CA, the Northeast Corridor, NY.

The median home price in CA is over $500k. SF is over $1 mil, San Jose is over $800k, LA/OC/SD well over $500k.

https://www.zillow.com/ca/home-values/

Just out of curiosity, which state do you live in?

The current MID encourages the building of single family dwellings which is the least effective allocation of space in those cities. They need to go up ala NY, Singapore, and Hong Kong. This applies in particular to SF with its nightmare geographical limitations. But it's all about the "got mine, fuck you" attitude in those cities.