I don’t think the mortgage deduction is bad math at all. It’s a benefit of having a mortgage, but shouldn’t be the only reason to get a mortgage.

Some insight from my self-employed days: If you’re self employed (non w2 worker) than those Hummers & Suburbans are a huge tax write off. Depending on which way the wind is blowing in Washington (they keep changing the depreciation schedule), you can depreciate any vehicle over 6000 pounds directly lowering your taxable income. Since self-employed people can (as do) write off everything under the sun, there is little income left to tax when they get to the itemized deductions. Kick in a few tax credits and we’re talking zero taxes Plus a check from the IRS.

I’ve talked with tax advisers who’ve dealt with the self-employed all their lives. They’ll advise them to pay taxes for a few years prior to age 65 so they can have SOME income show up and be eligable for Social Security.

It’s easier to afford the huge house and the big cars in the driveway when you don’t pay taxes. If you’re interested, I’ll write an article when my taxes are done this year.

You’re right. It’s hard to deduct mortgage interest if that’s the only deduction you have. But, add all the other deductions to it (for us tithe is a big one) and it isn’t as hard to get the deduction.

Agree that the home prices will likely to fall more. The ownership cost adjusted for taxes is normally close to the rent one would pay for a similar property. Today there is a huge discrepancy between rents and prices. The slump in the 90s lasted for years (here in NY). As much as I hate the idea of my home value going down, I just don’t see how these prices can hold. How is today’s situation better than what we saw in the 90s?

The ratio skyrocketed during the housing bubble for two
reasons: First, the Federal Reserve fueled the housing
boom with historic low interest rates. Second, the Fed
turned a blind eye to risky mortgage products like option
ARMs and negative amortization loans.

Also, every major housing depreciation in our nation’s history has taken place during a recession (whether national or local). Texas in the 80s when oil collapsed. LA and NY in the early 90s during the national recession.

We are seeing housing slow ahead of a true recession. If we see a traditional recession with job losses and reduced spending, housing will follow. Currently, sellers do not need to sell. They can anchor to 2005 prices. When more and more folks need to sell, prices will drop.

Every time a discussion comes up about good debt and bad debt, someone chimes in about mortgage debt being good because that interest is deductible. Maybe it is deductible for rich folks, but it’s never going to be deductible for me.

Mortgage debt may be good debt because its costs are offset by the rent you would have paid, because the interest terms are lower than other kinds of debt, and because of the intangible benefits of being in your own home. But the mortgage interest deduction isn’t even on the radar for lots of “regular folks.”

Good luck ,

Tracy Ho
wisdomgettingloaded