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You do realize that renters pay property tax, just indirectly, right? Property taxes aren't paid only by owner-occupied homes. Mortgage tax deductions are only

You do realize that renters pay property tax, just indirectly, right? Property taxes aren't paid only by owner-occupied homes. Mortgage tax deductions are only on a primary home, so they don't apply to owners of rental units. Put simply: property taxes are NOT a penalty for homeownership, they are paid by everyone. Mortgage tax credit is only given to homeowners.

bufordsharkley 10y ago
And importantly, only enjoyed by homeowners who got the mortgage before the benefit of the tax deduction started getting capitalized into the value of the house.
- quadrangle 10y ago
  wait, what? There's a $250k capital gains exemption for sale of primary home lived in 2 of past 5 years, so isn't capital gain basically irrelevant to anyone but very wealthy? Do you know something I don't? (reasonably likely)
  - drewgross 10y ago
    What he means is that the deduction has been "priced in" to the price of homes/mortgages. In a similar story, a company I used to work for once offered employees a $x incentive to live close to the office. They then found that the price of homes in the area immediately went up by $x.
    - quadrangle 10y ago
      Got it, of course! Capitalized could be a formal tax term in this case, but it was just meant in terms of actual plain capitalization generally. Yeah, mortgage tax deduction, like all incentives that encourage borrowing more money, ends up being a transfer of wealth from new homebuyers to whoever had owned property outright (whether older long-term homeowners or developers or real estate investors). Very important point.
bzbarsky 10y ago
> Mortgage tax deductions are only on a primary home, so they don't apply to owners of rental units. Mortgage interest on a rental unit is deductible against the rental income on that unit for obvious reasons: it's a business expense for the rental business and hence taken out of gross revenue for that business to figure out the (taxable) profits. Specifically, for US individual federal taxes in 2016, see Form 1040, Schedule E, line 12. This is the form you use if you haven't actually formally incorporated your rental activity as a business. Note that you can also deduct your spending on repairs to the rental property, insurance on it, property taxes (line 16 on that form), and so forth, for the exact same reasons: income taxes on business-like activity are levied on net income, not gross income. The only people who can't take a mortgage interest deduction are people who have a second home that they are _not_ renting out.

bufordsharkley 10y ago

And importantly, only enjoyed by homeowners who got the mortgage before the benefit of the tax deduction started getting capitalized into the value of the house.

quadrangle 10y ago
wait, what? There's a $250k capital gains exemption for sale of primary home lived in 2 of past 5 years, so isn't capital gain basically irrelevant to anyone but very wealthy? Do you know something I don't? (reasonably likely)
- drewgross 10y ago
  What he means is that the deduction has been "priced in" to the price of homes/mortgages. In a similar story, a company I used to work for once offered employees a $x incentive to live close to the office. They then found that the price of homes in the area immediately went up by $x.
  - quadrangle 10y ago
    Got it, of course! Capitalized could be a formal tax term in this case, but it was just meant in terms of actual plain capitalization generally. Yeah, mortgage tax deduction, like all incentives that encourage borrowing more money, ends up being a transfer of wealth from new homebuyers to whoever had owned property outright (whether older long-term homeowners or developers or real estate investors). Very important point.

bzbarsky 10y ago

> Mortgage tax deductions are only on a primary home, so they don't apply to owners of rental units. Mortgage interest on a rental unit is deductible against the rental income on that unit for obvious reasons: it's a business expense for the rental business and hence taken out of gross revenue for that business to figure out the (taxable) profits. Specifically, for US individual federal taxes in 2016, see Form 1040, Schedule E, line 12. This is the form you use if you haven't actually formally incorporated your rental activity as a business. Note that you can also deduct your spending on repairs to the rental property, insurance on it, property taxes (line 16 on that form), and so forth, for the exact same reasons: income taxes on business-like activity are levied on net income, not gross income. The only people who can't take a mortgage interest deduction are people who have a second home that they are _not_ renting out.