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Why is it fair to give a deduction for mortgage? Buying a home instead of renting is just choosing to invest in real estate instead of anything else you might i

Why is it fair to give a deduction for mortgage? Buying a home instead of renting is just choosing to invest in real estate instead of anything else you might invest in. Why artificially subsidize one extremely illiquid and volatile type of investment?

foota 10y ago
One could argue that by subsidizing home ownership you redistribute profit from people that rent out housing to those that would have been renting that housing.
- umanwizard 10y ago
  Yes, and by the same logic, subsidizing buying Apple shares redistributes profit from people that make iPhones to people that buy them. Why don't we do that instead?
  - foota 10y ago
    That's isn't actually what subsidizing apple shares would do? But the answer, is that people who buy and rent out property are generally better off than those renting, so redistributing income between them decreases income inequality.
- millstone 10y ago
  Mortgage interest is also deductible for rentiers. If owner-occupied mortgages were not deductible, it would be redistributing income from those who live in the properties they own, to those who own property and live elsewhere.
kunaalarya 10y ago
because you want to incentivize homebuying. Homebuying isn't just an investment. When your mortgage is paid off, it also means your cost of living when you can no longer work is much lower. It also means that you're less likely to be homeless or rely heavily on social services when you can no longer work. Homebuying also spurs a MASSIVE industry of homebuilding, and home furnishing, upgrading, etc.
wycx 10y ago
If you think that is bad, wait until you discover the situation in Australia. In the US, you get a deduction for interest on your primary residence. In Australia, you cannot do that, but instead, you get to make a deduction of interest in any investment property you own against your personal income! Plus investment properties have a lower capital gains tax rate than other asset classes. The tax laws in this country are fucked.
- lukevdp 10y ago
  Can someone from US confirm the tax treatment of interest on investment loans? Are they counted as an expense? Can losses from an investment property be deducted against other income? Also, in US is there any capital gains discount for property?
millstone 10y ago
If I buy real estate as an investment, I can deduct the mortgage like any business loan. Why artificially penalize owners who want to live in their properties over owners who don't?

foota 10y ago

One could argue that by subsidizing home ownership you redistribute profit from people that rent out housing to those that would have been renting that housing.

umanwizard 10y ago
Yes, and by the same logic, subsidizing buying Apple shares redistributes profit from people that make iPhones to people that buy them. Why don't we do that instead?
- foota 10y ago
  That's isn't actually what subsidizing apple shares would do? But the answer, is that people who buy and rent out property are generally better off than those renting, so redistributing income between them decreases income inequality.
millstone 10y ago
Mortgage interest is also deductible for rentiers. If owner-occupied mortgages were not deductible, it would be redistributing income from those who live in the properties they own, to those who own property and live elsewhere.

kunaalarya 10y ago

because you want to incentivize homebuying. Homebuying isn't just an investment. When your mortgage is paid off, it also means your cost of living when you can no longer work is much lower. It also means that you're less likely to be homeless or rely heavily on social services when you can no longer work. Homebuying also spurs a MASSIVE industry of homebuilding, and home furnishing, upgrading, etc.

wycx 10y ago

If you think that is bad, wait until you discover the situation in Australia. In the US, you get a deduction for interest on your primary residence. In Australia, you cannot do that, but instead, you get to make a deduction of interest in any investment property you own against your personal income! Plus investment properties have a lower capital gains tax rate than other asset classes. The tax laws in this country are fucked.

lukevdp 10y ago
Can someone from US confirm the tax treatment of interest on investment loans? Are they counted as an expense? Can losses from an investment property be deducted against other income? Also, in US is there any capital gains discount for property?

millstone 10y ago

If I buy real estate as an investment, I can deduct the mortgage like any business loan. Why artificially penalize owners who want to live in their properties over owners who don't?