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Interest expenses are deductible from all businesses taxes. (Wouldn't make sense if they weren't, as a money losing company could still be forced to pay income
by fallingknife 4y ago
Interest expenses are deductible from all businesses taxes. (Wouldn't make sense if they weren't, as a money losing company could still be forced to pay income tax.) So If I build an apartment building and rent out the units, my interest expenses are deducted, and nobody is arguing with that. So if I buy a house and live in it, why shouldn't I be able to deduct the same?
- RC_ITR 4y agoOk, and credit card interest?
- fallingknife 4y agoI would argue that should be deductible
- RC_ITR 4y agoOk let’s play that out. If I’m at the top marginal rate, I effectively gain 40 cents for every untaxed dollar. Loewe then tells me that instead of paying $5k for my calfskin bag today, I can take out a 1 year $1k loan with a 400% APR via store credit card. So now instead of needing $8.3k of gross income to afford that bag, I only need $5.7k! And you know who loses that $2.6k? The government. It’s a market skew, most people agree that frivolous consumption shouldn’t be subsidized in that way, but the home thing is still up for debate (though I think it’s a bad skew now that we aren’t trying to win the Cold War, personally).
- fallingknife 4y agoYou are not the first person to notice the tax shield effect of debt. Companies take on debt the don't need all the time to optimize their balance sheet to minimize tax liability. If they can do it, why not individual taxpayers?