What you fail to recognize is that most people rent when young, save up, and then buy a house. Most tax deductions for houses go away at seven years out of 30 because that is when the interest is paid down enough to start accruing principal. So, in a normal lifespan the mortgage deduction is about seven years total if one buys a home and keeps it.

However, people get to use the deduction multiple times with refinancing and buying a new house, buying a second house to flip, etc. The Heloc to buy a flat screen tv being a good example of what the deduction shouldn't be allowed for.

The answer is simple. Only give the deduction on the first mortgage, eliminate it for refinance or subsequent purchases (and heloc). This is already done with capital gains where you get one freebee on a house sale. If that is in the code then certainly a first time home buyer type deduction can be in the code.

I really find it alarming that in all of these discussions we don't look at a progression over time of what success in America should be. Help the first time is a reasonable thing and prevents the abuses of house flipping, second mortgages you can't afford, etc.

I know someone who bought their first house late in life with an FHA loan (first time buyer will a low down payment). This is help from the government but help only once. The deduction should match this sentiment and should match the capitol gains tax code. His neighbor took a second mortgage and is now losing the house. He wonders whether the neighbors heart attack was due in part to stress over how to repay the second mortgage when the market went flat?

For the renter whose chosen to never own a house, he knows that the mortgage deduction is only to get people on their feet in their first house and is not a renewable advantage for people to build up debt and get into trouble. In some respect his indignation is justified given the current crisis as he is not part of the problem.

As far as deducting property tax, the renter should recognize it is money that pays for the renters roads, services, etc locally and a property tax deduction should not be argued as unfair.

So no matter what groups you assign, most go through life being part of most of them. What we need is for the government not to be obligated to help forever and for the government to be able to help the newly adult or the new citizen. We should have a tax code that provides opportunity and not entitlement.

After that, we let America do what it does best which is to be "the land of opportunity."

DRKHRSE

If you do a little research on the sub prime mess you'll be suprised to find out it wasn't the first time home buyers as a lot of peole imply. Fanny and Freddie began speculating in derivatives like the rest of wall street and the government turned a blind eye (democrats not to blame for supporting home ownership but democrats to blame for not controlling the greedy people running Fanny and Freddie). I say democrats to blame as they've controlled congress since 2006 and the sub prime decisions at Fanny and Freddie were made about this time as well (Barney Frank was asleep at the wheel).

$500 Or $1,000 Property Tax Deduction for People Who Don’t Itemize Deductions

I believe the answer is 0 regardless of how you calculate it. Mortgage interest and property tax deductions are not inherently part of the standard deduction except in so far as they had not specifically allowed separately before.

Your argument does not hold up, and again, it is hard to take seriously, your assertion that group #2 is getting to deduct the same expense twice, when about half of the people taking the same deduction don’t have the expense in the first place.

Why aren’t you asking: Why are the people in group #3 allowed a deduction for an expense they don’t even have?

It is hard to take seriously, your assertion that group #2 is getting to deduct the same expense twice, when about half of the people taking the same deduction don’t have the expense in the first place.

-Dave

As to Group #3, they are not left out either. Presumably they rent. Their rent pays the landlord's mortgage interest and property tax. Because the landlord is able deduct those, the rent is lower than it otherwise will be. The renter's tax deduction comes in the form of a lower rent.

Your post offers a strangely skewed perspective, and seems based on the erroneous presupposition that everyone has a mortgage and directly pays property tax. You said "Everybody starts out listing their mortgage interest, property tax…” and “…they can take up on the offer from the IRS or say "no thanks" and stick to their original list of deductions, which include their mortgage interest, property tax…”. Those statements are inaccurate.
You ignore the fact that nearly a full third of the country does not own a home and because they don’t, they can’t benefit from mortgage interest and property tax deductions. Your definition of “Everybody” is inaccurate.
For the purposes of gauging benefit of the mortgage interest and property tax deductions with regard to taking or not taking the standard deduction, there are 3 groups, not 2.

1. People who benefit -Those who do itemize and take the deductions rather than the standard deduction
2. People who don’t benefit – Those who could take the deduction, but choose the standard deduction
3. People who can’t benefit – Those who can’t take the deductions and choose the standard deduction

When you compare the groups accurately, it becomes clear that there is no benefit in the mortgage interest and property tax deduction to the roughly 1/3rd of the country that both have those expenses and don’t have high enough income and/or deductable expenses to itemize.

The assertion, “…this tilts the scales toward the well-off”, from the Obama campaign literature is correct.

-Dave

Or they know perfectly well, but know this move and rhetoric will get them votes!

I've never really understood the whole gov't push towards homeownership, it just seems to inflate housing prices. But I'll take the deduction since those are the rules of the game.

That's a great piece of insight. I imagine I'll be using this one next time someone talks about deductions.

It's amazing how something this obvious can still be promoted at a national level as a great idea.

-John