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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Wyätt Gwyön who wrote (35971)7/22/2005 10:33:56 AM
From: GraceZRead Replies (1) of 306849
 
What is funny is that almost no one mentions that interest on a mortgage on rental property has always been 100% deductible plus it is in a place on the 1040 which gives it a higher weight (as well as the purchase price in the form of depreciation) so the government doesn't favor primary residences over rental. The mortgage interest deduction for individuals attempts to give individuals the equivalent deduction the rental owners (and ultimately their tenants) receive. I consider my rental properties to be a much bigger tax break than my mortgage interest. I've effectively received the rental income from my properties free of tax for 20 years as well as the tax free appreciation.

It has always been my contention that the interest deduction has always been a boon to lending institutions because people tend to pay less attention to prices when they perceive someone else is paying part of them. Without that deduction, people would be more apt to pay off mortgages and choose houses that they could pay a large down payment on or even (gasp) buy with cash. It's not homeowners who benefit from the deduction, it is the banks and mortgage lenders.

Ultimately, because profits are taxed, the government receives far more revenue with the interest deduction than it would receive without it. The government receives quite a bit of revenue indirectly from it's housing subsidy and this windfall is paid, of course, by the same individuals that it is meant to benefit!
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