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Anyone who bought a home in California in the last 10 years probably saves money by itemizing. Or any other high cost state with decently high income tax. It

by sbov 12y ago

Anyone who bought a home in California in the last 10 years probably saves money by itemizing. Or any other high cost state with decently high income tax. It isn't huge but I wouldn't call it extremely small... Any tech worker probably saves money by itemizing in California too. State taxes and salaries are high enough for that.

grandalf 12y ago
When I lived there I saved a tiny percentage by itemizing about half of the years, but then got hit by the AMT so it was all a massive waste of time. I could see that homeowners in CA would benefit by itemizing, however a simplified system could make something like mortgage interest much easier to factor in.
- maxerickson 12y ago
  The stated purpose of making mortgage interest deductible is to make home ownership more affordable. We should take a careful look at whether it accomplishes that goal. My not well studied understanding is that people price homes based mostly on the monthly payment they will make, so the mortgage interest deduction tends to make them willing to pay more for a given home. Rising prices do not make housing more affordable.
  - sbov 12y ago
    People seem buy houses based upon how much money a lender will give them. Hence the whole housing bubble problem. I'm not sure if lenders factor in deductions or not.
    - maxerickson 12y ago
      That has a very strong relationship with the monthly payment that they can manage.
      - sbov 12y ago
        But if lenders don't factor in the deduction, has no relationship to being able to deduct your mortgage interest.
  - dragonwriter 12y ago
    > My not well studied understanding is that people price homes based mostly on the monthly payment they will make, so the mortgage interest deduction tends to make them willing to pay more for a given home. As with any subsidy, you'd expect both an increase in the market clearing price of the subsidized good and an increase in the number of units sold at the market clearing price (that is, it increases both price and affordability), unless you have either perfect elasticity or perfect inelasticity, neither of which seems likely with homes. > The stated purpose of making mortgage interest deductible is to make home ownership more affordable. We should take a careful look at whether it accomplishes that goal. To the extent it does, it does only for people near the boundary of being able to afford to own a home, and does so (ceteris paribus) at the expense of everyone who isn't paying interest on a mortgage, including people too poor to do so even with the deduction -- who it therefore makes less likely to be able ever to afford a home. You'd do at least as much to make home ownership -- but also lots of other things -- more affordable by getting rid of the deduction and cutting base rates on below-median incomes such that the net result was revenue neutral before considering indirect economic effects.
  - grandalf 12y ago
    > The stated purpose of making mortgage interest deductible is to make home ownership more affordable. I would be happy to see the deduction go away along with all other deductions :)

by sbov 12y ago

grandalf 12y ago

When I lived there I saved a tiny percentage by itemizing about half of the years, but then got hit by the AMT so it was all a massive waste of time. I could see that homeowners in CA would benefit by itemizing, however a simplified system could make something like mortgage interest much easier to factor in.

maxerickson 12y ago
The stated purpose of making mortgage interest deductible is to make home ownership more affordable. We should take a careful look at whether it accomplishes that goal. My not well studied understanding is that people price homes based mostly on the monthly payment they will make, so the mortgage interest deduction tends to make them willing to pay more for a given home. Rising prices do not make housing more affordable.
- sbov 12y ago
  People seem buy houses based upon how much money a lender will give them. Hence the whole housing bubble problem. I'm not sure if lenders factor in deductions or not.
  - maxerickson 12y ago
    That has a very strong relationship with the monthly payment that they can manage.
    - sbov 12y ago
      But if lenders don't factor in the deduction, has no relationship to being able to deduct your mortgage interest.
- dragonwriter 12y ago
  > My not well studied understanding is that people price homes based mostly on the monthly payment they will make, so the mortgage interest deduction tends to make them willing to pay more for a given home. As with any subsidy, you'd expect both an increase in the market clearing price of the subsidized good and an increase in the number of units sold at the market clearing price (that is, it increases both price and affordability), unless you have either perfect elasticity or perfect inelasticity, neither of which seems likely with homes. > The stated purpose of making mortgage interest deductible is to make home ownership more affordable. We should take a careful look at whether it accomplishes that goal. To the extent it does, it does only for people near the boundary of being able to afford to own a home, and does so (ceteris paribus) at the expense of everyone who isn't paying interest on a mortgage, including people too poor to do so even with the deduction -- who it therefore makes less likely to be able ever to afford a home. You'd do at least as much to make home ownership -- but also lots of other things -- more affordable by getting rid of the deduction and cutting base rates on below-median incomes such that the net result was revenue neutral before considering indirect economic effects.
- grandalf 12y ago
  > The stated purpose of making mortgage interest deductible is to make home ownership more affordable. I would be happy to see the deduction go away along with all other deductions :)