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Heartlander · 80-89, M
For those who experienced a tax increase, shouldn't that tax increase be paired with the lower mortgage interest rate?
Like taxes for those likely went up because they no longer had the advantage of the interest deduction. But then once they refinanced to the lower rate mortgagees, their monthly mortgage payments were lower, and the two together put them back to were they started, or even better off.
For (some of) the rest of us, thanks for the low mortgage rates that inflated the value of our homes. A quick check suggests that our home value rose by about 30% over the past year, And for those of us who have mortgage free homes and are old, it means a whopping standard deduction and additional net worth that may be enough to see us through remaining years.
It's not enough to say how taxes went up or down, but also how those changes affected other parts of their overall financial affairs.
Like taxes for those likely went up because they no longer had the advantage of the interest deduction. But then once they refinanced to the lower rate mortgagees, their monthly mortgage payments were lower, and the two together put them back to were they started, or even better off.
For (some of) the rest of us, thanks for the low mortgage rates that inflated the value of our homes. A quick check suggests that our home value rose by about 30% over the past year, And for those of us who have mortgage free homes and are old, it means a whopping standard deduction and additional net worth that may be enough to see us through remaining years.
It's not enough to say how taxes went up or down, but also how those changes affected other parts of their overall financial affairs.
dancingtongue · 80-89, M
@Heartlander [quote] But then once they refinanced to the lower rate mortgagees, their monthly mortgage payments were lower, and the two together put them back to were they started, or even better off.[/quote]
And there's the rub. For those of at this age it makes little sense to continually re-finance so the banking industry can reset their calendars and the balance owed. So we got no re-set, we're still paying our own way with our property taxes, and still subsidizing red states by paying more Fed income taxes than Federal spending received while losing a portion of our tax write-offs while the red states -- getting their subsidies from the blue states -- essentially got to keep their tax write-offs. Rewarding those being subsidized; penalizing those providing the subsidies.
And there's the rub. For those of at this age it makes little sense to continually re-finance so the banking industry can reset their calendars and the balance owed. So we got no re-set, we're still paying our own way with our property taxes, and still subsidizing red states by paying more Fed income taxes than Federal spending received while losing a portion of our tax write-offs while the red states -- getting their subsidies from the blue states -- essentially got to keep their tax write-offs. Rewarding those being subsidized; penalizing those providing the subsidies.
SomeMichGuy · M
@dancingtongue I see what you mean:
[quote]In 2017, however, the Tax Cuts and Jobs Act passed and reformed federal tax law. One of the biggest changes was a limitation on the SALT deduction, which went into effect in 2018. This change made it so that itemizing no longer makes sense for many -- and it also caused millions of Americans to lose a substantial portion of their deductions.[/quote]
(See [i]https://www.fool.com/taxes/how-10000-limit-state-local-tax-deductions-works/[/i])
This seems to unfairly affect people who live in places where the base cost of living is higher (e.g., much of California) than in areas where housing, food, utilities, transportation, taxes are much less.
[quote]In 2017, however, the Tax Cuts and Jobs Act passed and reformed federal tax law. One of the biggest changes was a limitation on the SALT deduction, which went into effect in 2018. This change made it so that itemizing no longer makes sense for many -- and it also caused millions of Americans to lose a substantial portion of their deductions.[/quote]
(See [i]https://www.fool.com/taxes/how-10000-limit-state-local-tax-deductions-works/[/i])
This seems to unfairly affect people who live in places where the base cost of living is higher (e.g., much of California) than in areas where housing, food, utilities, transportation, taxes are much less.
dancingtongue · 80-89, M
@SomeMichGuy I'm not sure where it shows up in the IRS forms/regs. But you are allowed deductions for certain state and local taxes when filing itemized federal income taxes. Which makes sense -- states and local governments who make an attempt to pay their own expenses rather than expecting the Feds to subsidize them lowers the demands on Fed spending. It is a concept you would think the conservatives would embrace. But Trump was upset because, on average, residents of Blue states that didn't vote for him were getting bigger deductions than residents of Red states who voted for him. So his administration pushed through a cap on state/local tax deductions that essentially made sure Red states kept their full tax deductions, Blue states lost chunks of theirs and would contribute even more into the Federal slush fund for subsidizing low-tax, low-reg Red states.
SomeMichGuy · M
@dancingtongue The ability to deduct either property taxes or state sales taxes is on Schedule A, Itemized Deductions.
For me, the increase in the standard deduction amounts were so generous that it made filing the Schedule A unnecessary.
But following your argument, it is sad to see another way Trump screwed over Democratic areas...
For me, the increase in the standard deduction amounts were so generous that it made filing the Schedule A unnecessary.
But following your argument, it is sad to see another way Trump screwed over Democratic areas...
fanuc2013 · 51-55, F
@Heartlander What if you don't have a mortgage? Why should that have anything to do with it?
SomeMichGuy · M
@fanuc2013 smh
Since a primary power of Congress is to tax, most policies get expressed via the Internal Revenue Code. (If you are near a library which has the printed US Code, just look over it and see how thick those couple of volumes are.)
The government has encouraged home ownership because of a number of things, including that home ownership boosts the economy, locally and nationally (and globally), and that owning real estate is a good way to build wealth.
But look at the 1040 Schedule A before and after the Trump changes.
Before: you could take off both state income taxes and property taxes.
After: the amount is capped at $10k.
For people who live in higher-tax locales, the change can be--as is being reported im this reply thread--very negative; the federal tax code was helping to make it possible to live in those areas, and some (many? most?) people do this because of their job, not because they love high taxes. It did not hurt me, but I can see it being a problem in California, etc.
Since a primary power of Congress is to tax, most policies get expressed via the Internal Revenue Code. (If you are near a library which has the printed US Code, just look over it and see how thick those couple of volumes are.)
The government has encouraged home ownership because of a number of things, including that home ownership boosts the economy, locally and nationally (and globally), and that owning real estate is a good way to build wealth.
But look at the 1040 Schedule A before and after the Trump changes.
Before: you could take off both state income taxes and property taxes.
After: the amount is capped at $10k.
For people who live in higher-tax locales, the change can be--as is being reported im this reply thread--very negative; the federal tax code was helping to make it possible to live in those areas, and some (many? most?) people do this because of their job, not because they love high taxes. It did not hurt me, but I can see it being a problem in California, etc.