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> I also learned recently that the realtor lobby has fought hard to keep the mortgage interest tax deduction which helps home owning persons but hurts everyone

> I also learned recently that the realtor lobby has fought hard to keep the mortgage interest tax deduction which helps home owning persons but hurts everyone else. > Why am I able to use my single rental as a tax shelter? The tax deduction is only available on your primary and secondary residences. (Where secondary here refers to a second home, not a third, etc.) You don't get to claim a primary or secondary residence mortgage interest deduction on your rental properties, because you aren't living there. This arose out of a previous law that generally allowed for the deduction if interest on all loans because it was administratively unfeasible to differentiate between business and personal interest expense (or so said the wisdom at the time). Even today, business interest expenses are generally deductible. This is wholly separate from the mortgage interest deduction, which is for owner-occupied homes.

mdorazio 3y ago
You didn't actually address any of the parent concerns about why. Why should anyone get a deduction on a second home when inventory levels are at historic lows? Why should homeowners get a fat tax deduction from their mortgage when I as a renter get nothing? Going further, why should anyone get to exclude a quarter of a million dollars on capital gains when they sell their home?
- ethbr1 3y ago
  You, as a renter, are getting it -- your landlord is deducting their (commercial property) mortgage interest from their income (your rent). Probably in their Schedule E. [0] Furthermore, for homes purchased after 2017, the personal mortgage interest deduction has been capped on $750,000 of mortgage debt (first and second home only, combined). [1] Given the boosted standard deduction, thus isn't a major difference. If you're going to pick a windmill to tilt at, there are much larger structural issues in US housing. As mentioned elsewhere: zoning that precludes new unit construction, SFH zoning for areas that would support denser development, etc. [0] https://www.irs.gov/businesses/small-businesses-self-employed/tips-on-rental-real-estate-income-deductions-and-recordkeeping https://www.irs.gov/businesses/small-businesses-self-employe... [1] https://www.irs.gov/publications/p936#en_US_2022_publink1000229993 https://www.irs.gov/publications/p936#en_US_2022_publink1000...
  - cool_dude85 3y ago
    Oh, the free market passes this sweetheart deal on to me, the renter. Glad to see how well the system works.
    - gigatexal 3y ago
      Haha it sure as shit does not. Landlord's keep it. The reasoning that shareholder/landlord savings either via by tax or fiat are shared with tenants or customers is a hilariously wrong fallacy of trickle-down economic thinking that has been debunked.
      - ethbr1 3y ago
        It's literally impossible to "keep it." The landlord charges what they believe they can charge. That's set by market rates in your local area (or cartels like RealPage [0] et al.). And that's set to homogenize returns with national rental alternatives. And that's set by alternative options to invest of capital. If you +5% to the costs of operating rental property, by removing a deduction, rents are going to go up. And focusing on commercial mortgage interest deductions is ridiculous, as they're accounted for in the exact same way as every other business: expenses deducted from income. [0] https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...
        gigatexal 3y ago
        I’m hypothesizing that removing favorable tax incentives for owners will cool real estate speculation and cause demand for homes to fall such that prices fall such that more renters become owners. There’s an eventual equilibrium sure but it’s probably at prices less than they are now. I’ll concede to you on the costs flowing to renters in the sense that if ownership costs go up for all owners rents would follow. I still think as a category the asset is far too tax advantaged at the expense of the poor or the non-home owning to the detriment of society as a whole.
        3y ago
gigatexal 3y ago
There should not be a deduction for the interest paid. It makes no sense and only helps the relatively affluent who can own/buy homes.
dugmartin 3y ago
If you have a commercial loan the interest is tax deductible as a business expense. The "tax shelter" many people think of when thinking of becoming a landlord (and is not allowed) is deducting passive losses each year (eg rental income is less than all your rental expenses) when you are not a "real estate professional" as per the IRS guidelines. You can deduct those passive losses when you sell "substantially all" your property. IANAL but I did own, landlord and then sell a commercial property (and would never do it again).

mdorazio 3y ago

You didn't actually address any of the parent concerns about why. Why should anyone get a deduction on a second home when inventory levels are at historic lows? Why should homeowners get a fat tax deduction from their mortgage when I as a renter get nothing? Going further, why should anyone get to exclude a quarter of a million dollars on capital gains when they sell their home?

ethbr1 3y ago
You, as a renter, are getting it -- your landlord is deducting their (commercial property) mortgage interest from their income (your rent). Probably in their Schedule E. [0] Furthermore, for homes purchased after 2017, the personal mortgage interest deduction has been capped on $750,000 of mortgage debt (first and second home only, combined). [1] Given the boosted standard deduction, thus isn't a major difference. If you're going to pick a windmill to tilt at, there are much larger structural issues in US housing. As mentioned elsewhere: zoning that precludes new unit construction, SFH zoning for areas that would support denser development, etc. [0] https://www.irs.gov/businesses/small-businesses-self-employed/tips-on-rental-real-estate-income-deductions-and-recordkeeping https://www.irs.gov/businesses/small-businesses-self-employe... [1] https://www.irs.gov/publications/p936#en_US_2022_publink1000229993 https://www.irs.gov/publications/p936#en_US_2022_publink1000...
- cool_dude85 3y ago
  Oh, the free market passes this sweetheart deal on to me, the renter. Glad to see how well the system works.
  - gigatexal 3y ago
    Haha it sure as shit does not. Landlord's keep it. The reasoning that shareholder/landlord savings either via by tax or fiat are shared with tenants or customers is a hilariously wrong fallacy of trickle-down economic thinking that has been debunked.
    - ethbr1 3y ago
      It's literally impossible to "keep it." The landlord charges what they believe they can charge. That's set by market rates in your local area (or cartels like RealPage [0] et al.). And that's set to homogenize returns with national rental alternatives. And that's set by alternative options to invest of capital. If you +5% to the costs of operating rental property, by removing a deduction, rents are going to go up. And focusing on commercial mortgage interest deductions is ridiculous, as they're accounted for in the exact same way as every other business: expenses deducted from income. [0] https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent https://www.propublica.org/article/yieldstar-rent-increase-r...
      - gigatexal 3y ago
        I’m hypothesizing that removing favorable tax incentives for owners will cool real estate speculation and cause demand for homes to fall such that prices fall such that more renters become owners. There’s an eventual equilibrium sure but it’s probably at prices less than they are now. I’ll concede to you on the costs flowing to renters in the sense that if ownership costs go up for all owners rents would follow. I still think as a category the asset is far too tax advantaged at the expense of the poor or the non-home owning to the detriment of society as a whole.
        3y ago

gigatexal 3y ago

There should not be a deduction for the interest paid. It makes no sense and only helps the relatively affluent who can own/buy homes.

dugmartin 3y ago

If you have a commercial loan the interest is tax deductible as a business expense. The "tax shelter" many people think of when thinking of becoming a landlord (and is not allowed) is deducting passive losses each year (eg rental income is less than all your rental expenses) when you are not a "real estate professional" as per the IRS guidelines. You can deduct those passive losses when you sell "substantially all" your property. IANAL but I did own, landlord and then sell a commercial property (and would never do it again).