3 ms·

The tax deduction is baked into the price.

rayiner 11y ago
Maybe, maybe not: http://taxvox.taxpolicycenter.org/2013/06/05/what-changes-in-the-mortgage-deduction-would-mean-for-home-prices http://taxvox.taxpolicycenter.org/2013/06/05/what-changes-in.... This article estimates that eliminating the mortgage interest deduction would reduce home prices by ~12%. But if you're in the highest tax bracket, the tax benefit from deducting mortgage interest is around a 28% reduction in your effective payment. So at least at first, you'd lose more to the elimination of the deduction than you would gain in reduced payments.
- sokoloff 11y ago
  There's also a phase out in deductibility of mortgage interest at some income level, so it's not at all linear.
- dragonwriter 11y ago
  > This article estimates that eliminating the mortgage interest deduction would reduce home prices by ~12%. But if you're in the highest tax bracket, the tax benefit from deducting mortgage interest is around a 28% reduction in your effective payment. You're assuming that the average impact on home prices is the same as the impact on prices of homes bought by people irrespective of income. People of different incomes tend to buy different kinds of homes (or the same kinds of homes in different locations), so one would expect that removing (or adding) a subsidy that is income sensitive would have differential impacts on the homes typically bought by different income levels, not consistent impacts across all homes.
ianferrel 11y ago
The average tax deduction is baked into the price. Your personal tax deduction depends on your income.
- nostrademons 11y ago
  The price is usually dependent upon your income. McMansions are usually marketed to different types of couples than older duplexes and ranch houses, or new townhomes and condos. The tax deduction (based on your tax bracket) is baked into the market prices for each of these market segments.
imh 11y ago
There are some really interesting dynamics to that. Especially owner occupied deductions that effectively make it more expensive for pure investors and landlords.
- nwah1 11y ago
  Can we all take a moment to appreciate the good work of our nation's industrious land speculators. They hold prime land out of productive use, and this makes everyone better off. When a speculator buys oil, this encourages drilling for more oil. When a speculator buys land, it encourages people to create new land.

Maybe, maybe not: http://taxvox.taxpolicycenter.org/2013/06/05/what-changes-in-the-mortgage-deduction-would-mean-for-home-prices http://taxvox.taxpolicycenter.org/2013/06/05/what-changes-in.... This article estimates that eliminating the mortgage interest deduction would reduce home prices by ~12%. But if you're in the highest tax bracket, the tax benefit from deducting mortgage interest is around a 28% reduction in your effective payment. So at least at first, you'd lose more to the elimination of the deduction than you would gain in reduced payments.

sokoloff 11y ago
There's also a phase out in deductibility of mortgage interest at some income level, so it's not at all linear.
dragonwriter 11y ago
> This article estimates that eliminating the mortgage interest deduction would reduce home prices by ~12%. But if you're in the highest tax bracket, the tax benefit from deducting mortgage interest is around a 28% reduction in your effective payment. You're assuming that the average impact on home prices is the same as the impact on prices of homes bought by people irrespective of income. People of different incomes tend to buy different kinds of homes (or the same kinds of homes in different locations), so one would expect that removing (or adding) a subsidy that is income sensitive would have differential impacts on the homes typically bought by different income levels, not consistent impacts across all homes.

ianferrel 11y ago

The average tax deduction is baked into the price. Your personal tax deduction depends on your income.

nostrademons 11y ago
The price is usually dependent upon your income. McMansions are usually marketed to different types of couples than older duplexes and ranch houses, or new townhomes and condos. The tax deduction (based on your tax bracket) is baked into the market prices for each of these market segments.

imh 11y ago

There are some really interesting dynamics to that. Especially owner occupied deductions that effectively make it more expensive for pure investors and landlords.

nwah1 11y ago
Can we all take a moment to appreciate the good work of our nation's industrious land speculators. They hold prime land out of productive use, and this makes everyone better off. When a speculator buys oil, this encourages drilling for more oil. When a speculator buys land, it encourages people to create new land.