4 ms·

Do Danes get tax deductions on mortgage interest? One of the best tax deductions we get is the one on mortgage interest. Also this isn't really that great sinc

by disown 6y ago

Do Danes get tax deductions on mortgage interest? One of the best tax deductions we get is the one on mortgage interest. Also this isn't really that great since lower interest means higher home prices. I'd rather have high interest and low home prices if I were a buyer and try to pay if off ASAP or refinance to lower interest when the rate drops. Buy when interest is high and home prices low and sell when interest is low and home prices is high.

andechs 6y ago
The tax deduction on mortgage interest is one of the most regressive pieces of tax policy. Those with more expensive housing benefit more from the credit. Non-homeowners do not benefit at all, and renters tend to be poorer than homeowners.
- sokoloff 6y ago
  Renters are living in housing which is itself eligible for business loan deductions. If you believe that landlords use the cost of holding real estate as an input that shapes the supply side of the supply-demand balance in the broad rental market (as I do), then it seems that renters do indirectly benefit from the deductibility of the loans on the buildings in which they live. The mortgage interest deduction serves to put the purchasers of owner-occupied real estate onto a more equal footing with commercially-rented real estate. That seems like a valid public policy purpose, even though the mortgage interested deduction became substantially less valuable with TCJA-2017.
  - matsemann 6y ago
    But it keeps renters renters. I'd rather forego my tax deduction for owning my apartment and bake it into the normal tax. I feel it's unfair a friend can pay the same amount as me each month, but instead of paying down a loan he loses everything to a landlord. And in addition I also get to deduct the ~rents~ interest.
    - sokoloff 6y ago
      I'm not sure what you mean by "I also get to deduct the rents", but it doesn't match anything that I understand about the tax code.
      - matsemann 6y ago
        Lets say I pay $2000 each month in mortgage. Some of that is interest that I get to deduct on my taxes. So in practice I pay maybe $1700/month, and most of that is really me saving by building equity in my apartment. Before I bought the apartment, however, I paid more than that in rent. And all that was money going to someone else. If anyone deserves a tax break, it's those not privileged enough to yet own their own home. Edit: sorry, in my language "rente" is "interest", so I mixed them up and meant to say I get to deduct the interest part of my mortgage payment in my previous post. Probably where the confusion stems from.
  - deleted 6y ago
    [deleted]
mywittyname 6y ago
> One of the best tax deductions we get is the one on mortgage interest. Not anymore. The rise in the standard deduction combined with caps on SALT deductions has drastically curbed the value of mortgage tax deductions. As a result, the number of people in the bottom 90% of income who itemize their taxes has fallen precipitously. https://taxfoundation.org/standard-deduction-itemized-deductions-current-law-2019/ https://taxfoundation.org/standard-deduction-itemized-deduct... This is a good thing, because SALT and mortgage interest deductions were horrible, regressive policies.
- njarboe 6y ago
  From your link the only real change that the law made was to reduce the deduction of interest from a loan cap of $1 million to $750k. The SALT limit of $10k hurt a lot of people, but the mortgage deduction is not part of the $10k SALT (state and local tax) limit.
- tathougies 6y ago
  Yes, the increased standard deduction was one of the best things from the TCJA.
useerup 6y ago
Danes can deduct around 25% of paid interests (and "contribution fees" on mortgages). A little more for paid interests below DKK 50000 yearly and a little less for paid interests above DKK 50000. A typical home can sell for DKK 4M. With a 20 year 0% interest and 80% of the 4M mortgaged (the maximum allowed), the "contribution fee" would be set at 0,75%. That would amount to interests (0%) and "contribution fee" (0.75%) yearly around DKK 24000 (1st year) of which 25% = DKK 6000 will be deductible. To put that into perspective: A. An average "medium level" worker will have an average income of DKK 466,660/year[1] and pay DKK 159,212 in taxes, leaving a post-taxes income of DKK 307,448. B. An unemployed will receive DKK 225,894/year and pay DKK 58,952 in taxes, leaving a post-taxes income of DKK 166.942 So in reality the mortgage tax deduction does not amount to much. With those low interest rates it is around DKK 6000 or DKK 500/month for a typical family. Compare DKK 6000/year or DKK 500/month to: - a pair of Levi's: DKK 660 - a 4G/5G plan with 50GB/month: DKK 160/month - iPhone 12: DKK 7000 [1] https://www.dst.dk/en/Statistik/emner/arbejde-indkomst-og-formue/indkomster https://www.dst.dk/en/Statistik/emner/arbejde-indkomst-og-fo...
- djanogo 6y ago
  Are the property taxes high?
  - useerup 6y ago
    There's a property tax of 1% for home values up to around DKK 3M, and 3% for the value above 3M. That is the based on the "official estimated value", however, which is typically conservative and lagging and therefore somewhat less (like e.g. 60%) of what the property actually sells for. The 3M is set so that the vast majority of homes will not exceed this value. In addition to that we pay a "lot tax" which varies by municipality between 1.6% -3.4% of the value of the lot without the buildings.

by disown 6y ago

andechs 6y ago

The tax deduction on mortgage interest is one of the most regressive pieces of tax policy. Those with more expensive housing benefit more from the credit. Non-homeowners do not benefit at all, and renters tend to be poorer than homeowners.

sokoloff 6y ago
Renters are living in housing which is itself eligible for business loan deductions. If you believe that landlords use the cost of holding real estate as an input that shapes the supply side of the supply-demand balance in the broad rental market (as I do), then it seems that renters do indirectly benefit from the deductibility of the loans on the buildings in which they live. The mortgage interest deduction serves to put the purchasers of owner-occupied real estate onto a more equal footing with commercially-rented real estate. That seems like a valid public policy purpose, even though the mortgage interested deduction became substantially less valuable with TCJA-2017.
- matsemann 6y ago
  But it keeps renters renters. I'd rather forego my tax deduction for owning my apartment and bake it into the normal tax. I feel it's unfair a friend can pay the same amount as me each month, but instead of paying down a loan he loses everything to a landlord. And in addition I also get to deduct the ~rents~ interest.
  - sokoloff 6y ago
    I'm not sure what you mean by "I also get to deduct the rents", but it doesn't match anything that I understand about the tax code.
    - matsemann 6y ago
      Lets say I pay $2000 each month in mortgage. Some of that is interest that I get to deduct on my taxes. So in practice I pay maybe $1700/month, and most of that is really me saving by building equity in my apartment. Before I bought the apartment, however, I paid more than that in rent. And all that was money going to someone else. If anyone deserves a tax break, it's those not privileged enough to yet own their own home. Edit: sorry, in my language "rente" is "interest", so I mixed them up and meant to say I get to deduct the interest part of my mortgage payment in my previous post. Probably where the confusion stems from.
- deleted 6y ago
  [deleted]

mywittyname 6y ago

> One of the best tax deductions we get is the one on mortgage interest. Not anymore. The rise in the standard deduction combined with caps on SALT deductions has drastically curbed the value of mortgage tax deductions. As a result, the number of people in the bottom 90% of income who itemize their taxes has fallen precipitously. https://taxfoundation.org/standard-deduction-itemized-deductions-current-law-2019/ https://taxfoundation.org/standard-deduction-itemized-deduct... This is a good thing, because SALT and mortgage interest deductions were horrible, regressive policies.

njarboe 6y ago
From your link the only real change that the law made was to reduce the deduction of interest from a loan cap of $1 million to $750k. The SALT limit of $10k hurt a lot of people, but the mortgage deduction is not part of the $10k SALT (state and local tax) limit.
tathougies 6y ago
Yes, the increased standard deduction was one of the best things from the TCJA.

useerup 6y ago

Danes can deduct around 25% of paid interests (and "contribution fees" on mortgages). A little more for paid interests below DKK 50000 yearly and a little less for paid interests above DKK 50000. A typical home can sell for DKK 4M. With a 20 year 0% interest and 80% of the 4M mortgaged (the maximum allowed), the "contribution fee" would be set at 0,75%. That would amount to interests (0%) and "contribution fee" (0.75%) yearly around DKK 24000 (1st year) of which 25% = DKK 6000 will be deductible. To put that into perspective: A. An average "medium level" worker will have an average income of DKK 466,660/year[1] and pay DKK 159,212 in taxes, leaving a post-taxes income of DKK 307,448. B. An unemployed will receive DKK 225,894/year and pay DKK 58,952 in taxes, leaving a post-taxes income of DKK 166.942 So in reality the mortgage tax deduction does not amount to much. With those low interest rates it is around DKK 6000 or DKK 500/month for a typical family. Compare DKK 6000/year or DKK 500/month to: - a pair of Levi's: DKK 660 - a 4G/5G plan with 50GB/month: DKK 160/month - iPhone 12: DKK 7000 [1] https://www.dst.dk/en/Statistik/emner/arbejde-indkomst-og-formue/indkomster https://www.dst.dk/en/Statistik/emner/arbejde-indkomst-og-fo...

djanogo 6y ago
Are the property taxes high?
- useerup 6y ago
  There's a property tax of 1% for home values up to around DKK 3M, and 3% for the value above 3M. That is the based on the "official estimated value", however, which is typically conservative and lagging and therefore somewhat less (like e.g. 60%) of what the property actually sells for. The 3M is set so that the vast majority of homes will not exceed this value. In addition to that we pay a "lot tax" which varies by municipality between 1.6% -3.4% of the value of the lot without the buildings.