<p>I believe the rich are far more likely to pay cash for their house and not have a mortgage.</p>
<p>And there is already a cap on mortgage interest - you can only deduct interest on $1,000,000 of mortgage principal plus $100,000 of HE interest. At today’s rates that is $35,000-$40,000 a year, for a tax saving of $10-12,000 per year. </p>
<p>Not a poke in the eye, but not that much if you have a high income.</p>
<p>As for the effect on the housing industry - people have to live somewhere. It could put a little downward pressure on prices, but there are lots of people that take the standard deduction even though they have a mortgage because they don’t pay that much in interest.</p>
<p>I think if they phase out mortgage interest deduction it will be a means tested deduction – lower incomes will retain it, higher incomes will lose it.</p>
<p>I think the tax code is going to become more complex, not simpler. I think means testing and progressive policies will proliferate.</p>
<p>“I believe the rich are far more likely to pay cash for their house and not have a mortgage.”</p>
<p>If that were the case, they would be foolish - a lot of rich are rich because they take advantage of the system. Why should somebody stick millions into a house, if they can borrow it cheaply?</p>
<p>It’s a mixed bag, doct. If a person has money lying around making less than the mortgage rate, he/she might not want to borrow any money. You can actually net less money by having a mortgage, even with the low mortgage rates. Remember, you have to do something with the money.</p>
<p>Why should somebody stick millions into a house, if they can borrow it cheaply?</p>
<p>Uh. Well, because they can invest in businesses, partnerships, buy businesses outright, lend out their money. High end real estate is starting to recover but has been pretty flat. Why would a rich person bother investing in that sector of late?</p>
<p>Well uh - your comment is exactly why they would borrow all they can on a house because instead of sticking millions into it, they would invest it in other businesses, partnerships outright like Zuckerberg.</p>
<p>This might be the last good year to convert your traditional IRA to a Roth IRA because of the lower rate of conversion. Im still debating on this though for the past month and will definitely take time to study this step in the next couple of days.</p>
<p>As for charitable contributions, if the Pease Limitation is reinstated next year that will put a cap on itemized deductions for taxpayers with I think AGI over $174k (or $250k based on a certain proposal) then its best to do the generous charitable donation this year. However, if charitable contributions are excluded from the cap then it makes more sense to delay the generous amount to next year so that it counterbalances the higher tax rates next year.</p>
<p>Other tax savings steps you can take this December:
Contribute to a 529 account: You can always roll it over to another person such as a godchild if your children no longer need them
For these who have multi-million net worth, you might consider gifting now because the lifetime gift tax exclusion decreases from $5M this year to $1M next year.</p>
<p>Because when those were paid down, borrowing costs were much higher than today. I’m also not a billionaire, therefore mortgage costs coupled with college tuition etc would have had a significant impact. When I unload two of these houses and live in the third, I plan on not paying off my mortgage (assuming that I still have a deduction at that point). Right now I rent it out in the winter.</p>
<p>"The deep irony in all this is about playing on the naivete of the population. Throwing around terms like “the rich” to herd voters in directions that will end up hurting just about everyone but the actual “rich.” </p>
<p>Very true. I guess they think we are all completely oblivious to reality.</p>
<p>Most people that I know make over 250K and very few of them would consider themselves “rich”. If you make a high income via work, much of it is already taxed away anyways. I know some people worth hundreds of millions or more, who certainly don’t make their income the same way, and yeah, they are definitely “rich”, with lower tax rates than most of us.</p>
<p>I don’t understand why people aren’t screaming about this loudly. Or is it just okay if you raise taxes on everyone who makes $1.00 more than me, even if it doesn’t actually increase taxes on the rich?</p>
<p>*Well uh - your comment is exactly why they would borrow all they can on a house because instead of sticking millions into it, they would invest it in other businesses, partnerships outright like Zuckerberg. *</p>
<p>Sorry for my snarky “uh”. </p>
<p>What I meant was that mortgage interest deductions are of negligible value for the really rich. They are hugely valuable to the striver wage slaves in the 250k to 400k or so income brackets without the resources to buy outright their home and who are losing very large chunks to what they earn to income taxes.</p>
<p>Am I missing something in this take? I could be.</p>
<p>Doct, Well…you can try and finance the homes now if you want, but you just gave an argument why some people don’t have mortgages.</p>
<p>Many of my friends are getting mortgages in the 3 percent range. If I could borrow long term at 1 percent, maybe, maybe, I would think about it.</p>
<p>I’ve never understood how mortgage deductions benefit anyone other than banks and real estate brokers by inflating prices through a subsidy. Don’t most people buy a house based on how much they can afford rather than what they would like? So any benefits in the deduction is immediately nullified by the corresponding increase in price. </p>
<p>I think a back-door way of simplifying the tax code is to have AMTs that are very straightforward and with little or no exemptions and gradually inflate your way into it by not having sufficient cost of living allowance changes.</p>
<p>Different question altogether - what is the strategy for long term protection of the real value of current assets given all the bubbles that will come to fruition over the next 20-30 years? Asset taxes (like what Florida used to have - % of value intangible assets like mutual funds, not earnings)? Hyperinflation to reduce the current value of debts and assets? Progressive pricing models in more arenas so that higher income/asset people subsidize others? </p>
<p>It will be useful to see how societies that have overspent have dealt with these problems, like the way this country would need to in the next decades, so that we can plan for it.</p>
<p>"Doct, Well…you can try and finance the homes now if you want, but you just gave an argument why some people don’t have mortgages.</p>
<p>Many of my friends are getting mortgages in the 3 percent range. If I could borrow long term at 1 percent, maybe, maybe, I would think about it."</p>
<p>The point I was trying to make was for the rich - smart ones like Zuckerberg want to spend as little of their own money as possible - that’s how you get rich and that’s how you stay rich - spend other peoples’ money.</p>
<p>Nobody gives a crap about people that work and make 250,000 to 1,000,000 a year. There aren’t that many of you. You don’t make enough to buy favors. </p>
<p>Even people who make 250,000 to 1,000,000 defend the people that make more using capital, so the million dollar plus people are protected by those that make less and the power the wealthy can buy.</p>
<p>I don’t know why Zuckerberg did what he did. It is immaterial to him. But I agree with your last paragraph’s sentiments about using other people’s money to make yourself wealthy.</p>
<p>“Nobody gives a crap about people that work and make 250,000 to 1,000,000 a year. There aren’t that many of you. You don’t make enough to buy favors.”</p>
<p>Actually, most of the people who are in the target top 2% range are in that bracket, there are plenty of them. But you are right, they don’t make enough to buy favors.</p>