SALT and mortgage deductions

[xenon]

There's a child tax credit (if both parents are working), worth up to $2k per child. But the standard deduction stays at $24K now regardless of how many dependents you have.

[LuFins Dad]

@xenon said in SALT and mortgage deductions:

Did my taxes for the first time as a home owner (and therefore not taking the standard deduction).

Made me realize that some people must have gotten a massive tax hike from the Trump tax cut.

Feels like it would disproportionately affect upper-middle class / lower-upper class types. People who make a lot, but primarily from regular income and live in high tax states.

I know - not exactly a ground-breaking insight, but didn't really "click" until I did the taxes myself.

Also disclaimer - my taxes are still lower because of the Trump tax cut (I also live in a no-income tax state)

Didn't really affect many negatively. The Mortgage Interest Deduction is still there, you just need to have spent a lot of money in interest to make it advisable to itemize instead of taking the standard deduction.

My personal take was that it was going to affect new home sales as the Mortgage Interest Deduction was a deciding factor to many people in deciding to buy. It appears that I was wrong as the market is still hot right now.

[xenon]

@lufins-dad No it wouldn't affect many.

The interesting part is that it'd affect people increasingly as you move up the income distribution. But then as you get to the truly top 0.1% or something - it probably doesn't affect them anymore.

[jon-nyc]

@lufins-dad said in SALT and mortgage deductions:

The Mortgage Interest Deduction is still there,

It’s sorta there. They cap it at 10k. My property taxes are almost 35k. I have no mortgage, so unless my charitable giving is north of 14k I don’t itemize.

Someone in my neighborhood with a big mortgage would have gotten hit even harder. (They capped that too).

[Loki]

@xenon said in SALT and mortgage deductions:

Did my taxes for the first time as a home owner (and therefore not taking the standard deduction).

Made me realize that some people must have gotten a massive tax hike from the Trump tax cut.

Feels like it would disproportionately affect upper-middle class / lower-upper class types. People who make a lot, but primarily from regular income and live in high tax states.

I know - not exactly a ground-breaking insight, but didn't really "click" until I did the taxes myself.

Also disclaimer - my taxes are still lower because of the Trump tax cut (I also live in a no-income tax state)

Hit the blue states which like to pay taxes. I don’t see the issue.

[George K]

The mortgage interest deduction is not capped at $10K. You can deduct the interest on up to $750K of debt.

https://www.fool.com/taxes/2020/01/25/your-2020-guide-to-tax-deductions.aspx

The 2020 mortgage interest deduction
Mortgage interest is still deductible, but with a few caveats:

Taxpayers can deduct mortgage interest on up to $750,000 in principal.
The debt must be "qualified personal residence debt," which generally means the mortgage is backed by either a primary residence, second/vacation home, or by home equity debt that was used to substantially improve one of these residences.
Investment property mortgages are not eligible for the mortgage interest deduction, although mortgage interest can be used to reduce taxable rental income.
Home equity debt that was incurred for any other reason than making improvements to your home is not eligible for the deduction.

[jon-nyc]

Sorry I replied as if he said property tax deduction is still there. Before I could edit you replied.

Both are still there, but they’re capped.

[LuFins Dad]

@jon-nyc said in SALT and mortgage deductions:

@lufins-dad said in SALT and mortgage deductions:

The Mortgage Interest Deduction is still there,

It’s sorta there. They cap it at 10k. My property taxes are almost 35k. I have no mortgage, so unless my charitable giving is north of 14k I don’t itemize.

Someone in my neighborhood with a big mortgage would have gotten hit even harder. (They capped that too).

I’m pretty sure the 10K cap is on property tax deduction, not the mortgage interest. There is a cap of only interest on the first 750k borrowed...

[LuFins Dad]

@lufins-dad said in SALT and mortgage deductions:

@jon-nyc said in SALT and mortgage deductions:

@lufins-dad said in SALT and mortgage deductions:

The Mortgage Interest Deduction is still there,

It’s sorta there. They cap it at 10k. My property taxes are almost 35k. I have no mortgage, so unless my charitable giving is north of 14k I don’t itemize.

Someone in my neighborhood with a big mortgage would have gotten hit even harder. (They capped that too).

I’m pretty sure the 10K cap is on property tax deduction, not the mortgage interest. There is a cap of only interest on the first 750k borrowed...

Oh, didn’t read through the thread before I replied. George beat me to it.

[mark]

@george-k said in SALT and mortgage deductions:

Standard deduction for a married couple is, what, $25K or so? Throw in a kid, and you're close to $30K.

With the current value of the dollar, It should be more than twice that amount.

Actually, I am all for income tax not kicking in until a person makes more than $65k per year or $130k for a married couple. FICA/Medicare would still be withheld.

Unless there is a public health care option. Then just institute a 5-7% across the board tax on all income below $65k per person.

[LuFins Dad]

@mark said in SALT and mortgage deductions:

@george-k said in SALT and mortgage deductions:

Standard deduction for a married couple is, what, $25K or so? Throw in a kid, and you're close to $30K.

With the current value of the dollar, It should be more than twice that amount.

Actually, I am all for income tax not kicking in until a person makes more than $65k per year or $130k for a married couple. FICA/Medicare would still be withheld.

Unless there is a public health care option. Then just institute a 5-7% across the board tax on all income below $65k per person.

I still support a European style VAT

[xenon]

@lufins-dad said in SALT and mortgage deductions:

@mark said in SALT and mortgage deductions:

@george-k said in SALT and mortgage deductions:

Standard deduction for a married couple is, what, $25K or so? Throw in a kid, and you're close to $30K.

With the current value of the dollar, It should be more than twice that amount.

Actually, I am all for income tax not kicking in until a person makes more than $65k per year or $130k for a married couple. FICA/Medicare would still be withheld.

Unless there is a public health care option. Then just institute a 5-7% across the board tax on all income below $65k per person.

I still support a European style VAT

I'm a big fan of consumption taxes as well.

[xenon]

A few clarifications.

Mortgage deduction applies for debt up to $750k.

That's only going to be north of $20K if you have a 4%+ rate and/or are in the early part of your mortgage cycle (with more going to interest).

The SALT deduction is capped at 10K. That includes property, state income tax and even sales tax (rules are a bit wonky).

[Renauda]

@jon-nyc said in SALT and mortgage deductions:

My property taxes are almost 35k.

Seriously?

I can't imagine residential property taxes in that order of magnitude.

I thought mine were high at just over $5K. They are not deductable from income tax either.

[jon-nyc]

@renauda

Yep. Its a relatively modest house too. 2400 sq ft on 1/3 acre lot.

It seems outrageous (and it is), but most people moving here from the city are giving up city income tax and private school tuition in exchange, so its a deal. (property taxes in the city are quite low)

If I lived over the border in CT it would be half for the same house. But the commute to the city would be longer.

[xenon]

@renauda That's on the higher end. But not atypical.

For myself - I have a modest home (our first one) in an admittedly good neighborhood. But it's not too much more expensive than the median Seattle price.

Property taxes are 10K.

[jon-nyc]

I would say it's atypical.

NJ as a state has the highest property taxes in the nation, but at county level it's Westchester, NY.

[xenon]

@jon-nyc said in SALT and mortgage deductions:

I would say it's atypical.

NJ as a state has the highest property taxes in the nation, but at county level it's Westchester, NY.

The unsaid part is that I'm assuming you have a nice house, Jon

So not atypical from that aspect. But yeah, I get what you're saying. The tax rate is particularly high where you are.

[jon-nyc]

@jon-nyc said in SALT and mortgage deductions:

(property taxes in the city are quite low)

My Brooklyn place was over 2x the value of this place and the property taxes were under 5k.

[jon-nyc]

@xenon It's nice enough, but pretty modest - see above.