Pres Panel May Make Ownership Less Sweet
Amid yesterday’s chaotic server switch, we neglected to raise one burning issue for discussion: the proposed changes to the tax code that may include a significant roll-back of the deductibility of mortgage interest as well as a reduction in the amount of tax-free capital gains an individual or couple may take. It seems like strange…
Amid yesterday’s chaotic server switch, we neglected to raise one burning issue for discussion: the proposed changes to the tax code that may include a significant roll-back of the deductibility of mortgage interest as well as a reduction in the amount of tax-free capital gains an individual or couple may take. It seems like strange timing to spring this on the market now, with talk of the impending bursting of the bubble splashed across every front page. Depending on the scale, meaningful cutbacks on either measure would have to hurt the market, we’d think. What do people think about a) the likelihood of significant changes and b) the potential impact of such changes?
Mortgage Deduction Changes on Table [CNN Money]
The change in tax code to this every 2 year tax-free sale of primary residence at $250,000 has probably added some fuel to the escalation in property prices. More so in higher priced markets such as here in NY. How much it has added is difficult to determine.
It is of course another code in the tax law skewed toward to wealthier population.
The mortgage deduction, although used by a larger group, also benefits the affluent more.
But I think it is so sacrosanct thatit is unlikely will change in near future. So don’t worry too much folks. I don’t think Bush is likely to try alienating more people than he already has done already.
pardon the first time buyer- but this sounds good for middle-class owners, no? help ‘splain to me… thanks in advance.
At least the recommendations include current owners being grandfathered in under current tax laws. Still, when you sell to a buyer who can’t take a tax break combined with ever increasing interest rates it doesn’t bode well for home prices. Good thing I bought a month ago, although at least its a home I’m looking to die in, because I may have no choice.
jmc, You’re way oversimplifying the issue. If it’s anti-capitalistic to tax home-sale profits, then it’s anti-capitalistic to tax anything. We might as well disband the government. The fairness issue has to do with a tax system that privileges one form of making money (selling a home) over others (selling stocks, running a business, working a job, etc.)
Actually it would make more sense to argue that the home-sale deduction is what’s anti-capitalistic. It exempts a type of capital gain that is not essentially capitalistic (that is, most people selling primary homes did not buy as “capitalists,” mainly for investment purposes, but rather as consumers, mainly for shelter). And this exemption is paid for by taxing other kinds of capital gain and revenue.
Getting rid of exemption may be right or wrong, but anticapitalism has nothing to do with it.
The problem with the idea of eliminating the deductability of mortgage interest is that the whole economy is based upon housing. Consumer spending on home improvements ( Home Depot/Lowes), major purchases (appliances, renovations), [the only] consumer savings (equity contribution on mortgage payments), Local RE taxes (based on value), the list of economic dependencies in promoting home ownership is HUGE and if the Govt messes with this (even if it is ‘fair’) could cause major economic destruption.
“There’s just no good reason someone should be able to take a half million in tax free profits–and no way on earth that benefits anyone but those of us with a ton of money.”
Seriously, no good reason?!? It’s called capitalism, and the country is the US of A, not France, or Denmark, or Sweden.
Not every homeowner is able to max out the $500K deduction everytime they sell their house. The capital gain exemption benefits anyone and everyone who OWNS homes, and they can make $100 in profit or $500,000. Home ownership is the American dream, and IT HAS NEVER BEEN ABOUT “those of us with a ton of money”.
I hate to see this early in the morning discussions about who should make money and how they should do it. Now, off to make my own money.
I agree, too.
If these reforms passed, they’d be *really bad* for me, because we have our budget worked out counting on those tax breaks–but I still have to admit that the breaks seem tremendously unfair in the first place.
When we bought our house, I couldn’t believe it– Why should renters foot the bill for owners, who presumably (though not necessarily in my case) make more money?
I agree with Ben. I also think that in part, those tax reforms are meant to curb the obsession with real estate in the this country (albeit a tad late).
These reforms would be totally fair and a tiny step towards a more equitable tax code (thus there seems little likelihood the Bush admin will enact them.) There’s just no good reason someone should be able to take a half million in tax free profits–and no way on earth that benefits anyone but those of us with a ton of money.
I hate to get partisan this early in the morning, but you can always tell a democrat: if you propose something that will hurt them and help the less fortunate, we’ll always go for it.