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Thu Aug 2, 2012, 01:39 AM

The thing about the Mortgage Interest Deduction...

Since the value of the average home has gone somewhat south of where it was before the Bush Recession and a whole lot of people who were carrying 6% and above mortgages are now enjoying 3% - 4% rates, a whole bunch of taxpayers will not be paying enough mortgage interest in excess of the standard deduction.

Just something to ponder.

Depending on where the Standard Deductions are set, millions of Americans who were itemizing deductions will now be filing out simple returns...

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Arrow 8 replies Author Time Post
Reply The thing about the Mortgage Interest Deduction... (Original post)
WCGreen Aug 2012 OP
AndyTiedye Aug 2012 #1
hfojvt Aug 2012 #3
CaliforniaPeggy Aug 2012 #2
pitohui Aug 2012 #5
indie9197 Aug 2012 #4
pitohui Aug 2012 #6
indie9197 Aug 2012 #7
slackmaster Aug 2012 #8

Response to WCGreen (Original post)

Thu Aug 2, 2012, 01:43 AM

1. Few Have Mortgages That Small

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Response to AndyTiedye (Reply #1)

Thu Aug 2, 2012, 02:24 AM

3. it seems that many do

For example, in Maricopa County, Az, the median home price of 22,550 sold in the first quarter of 2012 was $135,000.

http://www.dqnews.com/Charts/Quarterly-Charts/Phoenix-Charts/ZIPAZ.aspx

Meaning, that half of those home sold for $135,000 or less. 4% interest on $135,000 (assuming 0% down payment) is only $5,400. Whereas the standard deduction is about $11,000.

In San Bernardino, Ca of 2,566 homes sold in June 2012, the median price was only $158,000. Providing a deduction of less than $6,320 for 50% of home buyers. Less if they put some money down (which would be prudent and probably required by most financers.

The median home price in Saline County, Ks was only $80,000 http://www.city-data.com/county/Saline_County-KS.html

Searching Lawrence, Kansas for homes under $75,000 brings me 18 results, including a 1200 foot 2 bath home built in 1970 for $59, 900.

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Response to WCGreen (Original post)

Thu Aug 2, 2012, 01:44 AM

2. That sounds like a good thing...

Isn't it?

Or are itemized deductions better than what you get with the simple return?

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Response to CaliforniaPeggy (Reply #2)

Thu Aug 2, 2012, 02:42 AM

5. no simplicity is better

and i bought my house when interest was 9%! sheet, i'm old!

despite what the other poster said, once you get away from the big important coasts, then you can have a nice house/neighborhood for way less than $150K and at current interest rates, yah, you can take the standard deduction because the math comes out the same for low/middle income people

try it both ways and see, just to be sure, but yes it's better to be able to take a simple standard deduction than to have to take something that is more complicated and for some people will require extra expense if they can't DIY

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Response to WCGreen (Original post)

Thu Aug 2, 2012, 02:38 AM

4. Get rid of the deduction!

It encourages being in debt.

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Response to indie9197 (Reply #4)

Thu Aug 2, 2012, 02:51 AM

6. get help

I mean welcome to DU and all but FFS (for you know what sake) people are "encouraged" to get in debt to have a home because having your own home is a primal instinct, sheesh. Nobody's encouraging anyone to do anything, they're simply tuning in to what people desire. Go spend 10 years in the Amazon rainforest studying some rare species and get back with me about people only buy a house because some banker told 'em to. Animals are territorial, and we are at core animals. I don't know ANY serious field biologist who doesn't understand that territory is an instinct, not something we were "sold" by advertising.

People should be encouraged to have their own home, it builds community and investment in the neighbordhood. Yes, disclosure, I got some gov't incentives thanks to Bush I to buy my home, but I'm still here, AND the neighborhood is still here. Bush 2 didn't have a brain in his head to try to win people back, but Obama is sharp enough to understand that human beings are animals who need to feel safe in their homes. You got a problem with that?

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Response to pitohui (Reply #6)

Thu Aug 2, 2012, 07:23 PM

7. don't need help

And I think that it is great that houses are getting cheap enough that people can realistically pay them off in 15 years or so. I just don't think having a perpetual mortgage is a comforting thing.

As you get further along in your mortgage term your interest payments go down anyway and you would not be able to itemize at some point. Would you refinance just so you could itemize? Why shouldn't the government encourage people to own their homes free and clear?

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Response to indie9197 (Reply #4)

Thu Aug 2, 2012, 07:36 PM

8. No it doesn't

 

Even if all of the interest you pay is deductible, you would still be better off paying no interest.

The mortgage interest deduction is intended to encourage home ownership by making the interest you pay on a mortgage less of a hit on your budget.

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