Home mortgage interest deduction Calculator

adds some perspective to the debate over the mortgage interest deduction.

1) If I buy a property and rent it out, then my income is equal to the rent that I get, minus expenses, including interest payments on a mortgage. Thus, I get to deduct mortgage interest.

(2) If homeowners could not deduct mortgage interest, then landlords would have an advantage. That is, the landlord could deduct mortgage interest, but the homeowner could not.

(3) As a homeowner, I do not count as income the “rent” that I earn on the house. This gives me an advantage over a landlord.

(4) Also, I do not count as income a capital gain from selling the house. This is another advantage over a landlord.

He says the main distortions arise from (3) and (4), and removing them would improve the argument for maintaining the deduction. He also, realistically, notes that the popularity of the deduction means it’s here to stay.

One way to make the deduction less popular is to force the real estate industry to stop selling the deduction as an advantage for one and all. If you search for mortgage interest deduction calculators you get sites like and . Egregiously they calculate the amount of money you save via the deduction, but fail to compare the benefits of the deduction to the benefit of the standard deduction. Most first time home buyers, particularly in this era of low interest rates, will not itemize and take the deduction since it will inevitably result in a smaller deduction than that allowed by the standard deduction.

The depth of disclosure inherent in the home buying experience far exceeds the disclosure for any other financial transaction. It seems more than odd that a sales tool – the deductability advantage – would not be subject to disclosure as well. It’s a simple calculation and surprising that this sort of hype has been allowed to continue unfettered while so much else is required. It would seem an area ripe for regulation via the Consumer Financial Protection Bureau.

Exposing the regressive nature of the mortgage interest deduction would go a long way towards changing sentiment as voters realized that it’s not a universal benefit of homeownership. In this day and age of sticking it to the rich, it also would play politically.

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Home office deduction

2006-10-12 14:29:41 by paulthodeEA

Home Office Deduction: Basic Requirements
Generally, expenses related to the rent, purchase, maintenance and repair of a personal residence may not be deducted as a business expense. However, taxpayers who use a portion of their home for business purposes may be able to take a home office deduction if they meet certain requirements. Expenses that may be deducted include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, painting, repairs and depreciation. Note: The amount of depreciation deducted, or that could have been deducted, decreases the basis of your property

Does a starter home make sense?

2007-04-28 12:09:25 by gavinln

Let's assume a potential home buyer purchases a starter home in the Bay Area planning to live in it for 5 years before upgrading to a more expensive home. Currently it costs about 3% of house price more to buy such a starter home than rent the equivalent home.
How do I calculate this 3% difference? Well if you assume buying using an interest only mortgage at about 6.25% you get a tax deduction so the monthly mortgage payment is less than this but then you have to pay property tax but you get a deduction on that, but as an owner you have to pay for maintenance and insurance which are not tax deductible

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A household making $45,000 in 2012 could expect to buy a home priced 2.7 percent higher than they would have without the mortgage interest deduction.

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