5 ms·

Suppose Person A lives in a house with a mortgage, and Person B lives in an apartment with a lease. Suppose -- it's unlikely, but for sake of the hypothetical -

Suppose Person A lives in a house with a mortgage, and Person B lives in an apartment with a lease. Suppose -- it's unlikely, but for sake of the hypothetical -- Person A's monthly mortgage and Person B's monthly rent payment are the same dollar amount and their gross annual income is the same. Person B -- the renter -- will pay more income tax, because Person B does not get to deduct mortgage interest while Person A does. In much the same way, if Person A carries insurance all year and Person B doesn't, Person B will pay more income tax. So yes, you do get "fined" for not buying a house. We just spin it as "encouraging the dream of home ownership" instead of as a "fine", a "penalty", as "the government holding a gun to your head and forcing you to buy a house", etc.

dkresge 10y ago
How would a renter feel if their rent increased because their landlord was unable to take a mortgage deduction? In other words, is the deduction implicitly distributed pro-rata to the supporting renters via market force?
- ubernostrum 10y ago
  In the US, the home mortgage interest deduction does not apply to rental properties. To qualify for the deduction, you either have to use the home as your residence for a minimum period each year, or rent only part of it (and meet requirements for renting part of the home: you can't have more than two tenants, and the part of the home they live in can't have its own separate kitchen or toilet facilities).
  - dkresge 10y ago
    But that's the home deduction. Apartment buildings, for example, are investment property for which mortgage interest is a deductible expense. https://www.irs.gov/publications/p527/ch01.html https://www.irs.gov/publications/p527/ch01.html
    - ubernostrum 10y ago
      Then you concede that taking away the home mortgage interest deduction (making the homeowner-who-resides-in-the-owned-home and the renter equal for tax purposes) would not drive up rents, and your original comment was at worst wrong and at best a non sequitur.
      - dkresge 10y ago
        I'm positing false equivalence. Taking away the home mortgage interest deduction would make the homeowner and renter unequal. Doing so would not drive up rents, just as eliminating the mortgage deduction on investment property wouldn't impact house prices.
        ubernostrum 10y ago
        You said: How would a renter feel if their rent increased because their landlord was unable to take a mortgage deduction? I countered that the home mortgage interest deduction doesn't apply to rental properties. Renters and homeowners are thus currently unequal from a tax standpoint, since renters effectively pay a higher tax rate than homeowners. Removing the deduction would thus not create a new inequality; it would remedy an existing one.
        dragonwriter 10y ago
        The home mortgage interest deduction specifically doesn't, but mortgage interest on rental properties is still generally deductible. https://www.irs.gov/publications/p527/ch01.html https://www.irs.gov/publications/p527/ch01.html
MicroBerto 10y ago
I wholeheartedly disagree. If I choose to live rent-free in my parents' basement, I will not get fined for doing so. I keep ALL of my cash. But I'll STILL get fined for having not buying myself insurance. I'm not sure what logical fallacy you're throwing here, some form of "Denying the antecedent" or something along those lines, but it's not the same situation.
- ubernostrum 10y ago
  In both cases, A does something and B does not, and the result is B pays more income tax than A despite A and B having equal income. Why people insist the two cases are conceptually different (i.e., that one and only one of them is a "fine" for not doing the thing), I do not know.

dkresge 10y ago

How would a renter feel if their rent increased because their landlord was unable to take a mortgage deduction? In other words, is the deduction implicitly distributed pro-rata to the supporting renters via market force?

ubernostrum 10y ago
In the US, the home mortgage interest deduction does not apply to rental properties. To qualify for the deduction, you either have to use the home as your residence for a minimum period each year, or rent only part of it (and meet requirements for renting part of the home: you can't have more than two tenants, and the part of the home they live in can't have its own separate kitchen or toilet facilities).
- dkresge 10y ago
  But that's the home deduction. Apartment buildings, for example, are investment property for which mortgage interest is a deductible expense. https://www.irs.gov/publications/p527/ch01.html https://www.irs.gov/publications/p527/ch01.html
  - ubernostrum 10y ago
    Then you concede that taking away the home mortgage interest deduction (making the homeowner-who-resides-in-the-owned-home and the renter equal for tax purposes) would not drive up rents, and your original comment was at worst wrong and at best a non sequitur.
    - dkresge 10y ago
      I'm positing false equivalence. Taking away the home mortgage interest deduction would make the homeowner and renter unequal. Doing so would not drive up rents, just as eliminating the mortgage deduction on investment property wouldn't impact house prices.
      - ubernostrum 10y ago
        You said: How would a renter feel if their rent increased because their landlord was unable to take a mortgage deduction? I countered that the home mortgage interest deduction doesn't apply to rental properties. Renters and homeowners are thus currently unequal from a tax standpoint, since renters effectively pay a higher tax rate than homeowners. Removing the deduction would thus not create a new inequality; it would remedy an existing one.
        dragonwriter 10y ago
        The home mortgage interest deduction specifically doesn't, but mortgage interest on rental properties is still generally deductible. https://www.irs.gov/publications/p527/ch01.html https://www.irs.gov/publications/p527/ch01.html

MicroBerto 10y ago

I wholeheartedly disagree. If I choose to live rent-free in my parents' basement, I will not get fined for doing so. I keep ALL of my cash. But I'll STILL get fined for having not buying myself insurance. I'm not sure what logical fallacy you're throwing here, some form of "Denying the antecedent" or something along those lines, but it's not the same situation.

ubernostrum 10y ago
In both cases, A does something and B does not, and the result is B pays more income tax than A despite A and B having equal income. Why people insist the two cases are conceptually different (i.e., that one and only one of them is a "fine" for not doing the thing), I do not know.