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  3. SALT and mortgage deductions

SALT and mortgage deductions

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  • X Offline
    X Offline
    xenon
    wrote on 3 Feb 2021, 15:47 last edited by xenon 2 Mar 2021, 15:58
    #1

    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)

    L L 2 Replies Last reply 3 Feb 2021, 16:47
    • G Offline
      G Offline
      George K
      wrote on 3 Feb 2021, 16:34 last edited by
      #2

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

      "Now look here, you Baltic gas passer... " - Mik, 6/14/08

      The saying, "Lite is just one damn thing after another," is a gross understatement. The damn things overlap.

      M 1 Reply Last reply 3 Feb 2021, 18:24
      • X Offline
        X Offline
        xenon
        wrote on 3 Feb 2021, 16:40 last edited by
        #3

        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.

        1 Reply Last reply
        • X xenon
          3 Feb 2021, 15:47

          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)

          L Offline
          L Offline
          LuFins Dad
          wrote on 3 Feb 2021, 16:47 last edited by
          #4

          @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.

          The Brad

          X J 2 Replies Last reply 3 Feb 2021, 16:52
          • L LuFins Dad
            3 Feb 2021, 16:47

            @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.

            X Offline
            X Offline
            xenon
            wrote on 3 Feb 2021, 16:52 last edited by
            #5

            @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.

            1 Reply Last reply
            • L LuFins Dad
              3 Feb 2021, 16:47

              @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.

              J Online
              J Online
              jon-nyc
              wrote on 3 Feb 2021, 17:15 last edited by
              #6

              @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).

              Only non-witches get due process.

              • Cotton Mather, Salem Massachusetts, 1692
              L R J 3 Replies Last reply 3 Feb 2021, 17:44
              • X xenon
                3 Feb 2021, 15:47

                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)

                L Offline
                L Offline
                Loki
                wrote on 3 Feb 2021, 17:17 last edited by
                #7

                @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.

                1 Reply Last reply
                • G Offline
                  G Offline
                  George K
                  wrote on 3 Feb 2021, 17:19 last edited by
                  #8

                  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.

                  "Now look here, you Baltic gas passer... " - Mik, 6/14/08

                  The saying, "Lite is just one damn thing after another," is a gross understatement. The damn things overlap.

                  1 Reply Last reply
                  • J Online
                    J Online
                    jon-nyc
                    wrote on 3 Feb 2021, 17:20 last edited by jon-nyc 2 Mar 2021, 17:21
                    #9

                    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.

                    Only non-witches get due process.

                    • Cotton Mather, Salem Massachusetts, 1692
                    1 Reply Last reply
                    • J jon-nyc
                      3 Feb 2021, 17:15

                      @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).

                      L Offline
                      L Offline
                      LuFins Dad
                      wrote on 3 Feb 2021, 17:44 last edited by
                      #10

                      @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...

                      The Brad

                      L 1 Reply Last reply 3 Feb 2021, 17:45
                      • L LuFins Dad
                        3 Feb 2021, 17:44

                        @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...

                        L Offline
                        L Offline
                        LuFins Dad
                        wrote on 3 Feb 2021, 17:45 last edited by
                        #11

                        @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.

                        The Brad

                        1 Reply Last reply
                        • G George K
                          3 Feb 2021, 16:34

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

                          M Offline
                          M Offline
                          mark
                          wrote on 3 Feb 2021, 18:24 last edited by
                          #12

                          @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.

                          L 1 Reply Last reply 3 Feb 2021, 18:32
                          • M mark
                            3 Feb 2021, 18:24

                            @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.

                            L Offline
                            L Offline
                            LuFins Dad
                            wrote on 3 Feb 2021, 18:32 last edited by
                            #13

                            @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

                            The Brad

                            X 1 Reply Last reply 3 Feb 2021, 18:56
                            • L LuFins Dad
                              3 Feb 2021, 18:32

                              @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

                              X Offline
                              X Offline
                              xenon
                              wrote on 3 Feb 2021, 18:56 last edited by
                              #14

                              @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.

                              1 Reply Last reply
                              • X Offline
                                X Offline
                                xenon
                                wrote on 3 Feb 2021, 18:59 last edited by
                                #15

                                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).

                                AxtremusA 1 Reply Last reply 3 Feb 2021, 19:13
                                • J jon-nyc
                                  3 Feb 2021, 17:15

                                  @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).

                                  R Offline
                                  R Offline
                                  Renauda
                                  wrote on 3 Feb 2021, 19:03 last edited by Renauda 2 Mar 2021, 19:05
                                  #16

                                  @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.

                                  Elbows up!

                                  J X 2 Replies Last reply 3 Feb 2021, 19:06
                                  • R Renauda
                                    3 Feb 2021, 19:03

                                    @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.

                                    J Online
                                    J Online
                                    jon-nyc
                                    wrote on 3 Feb 2021, 19:06 last edited by jon-nyc 2 Mar 2021, 19:07
                                    #17

                                    @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.

                                    Only non-witches get due process.

                                    • Cotton Mather, Salem Massachusetts, 1692
                                    J R 2 Replies Last reply 3 Feb 2021, 19:10
                                    • R Renauda
                                      3 Feb 2021, 19:03

                                      @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.

                                      X Offline
                                      X Offline
                                      xenon
                                      wrote on 3 Feb 2021, 19:06 last edited by
                                      #18

                                      @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.

                                      1 Reply Last reply
                                      • J Online
                                        J Online
                                        jon-nyc
                                        wrote on 3 Feb 2021, 19:08 last edited by
                                        #19

                                        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.

                                        Only non-witches get due process.

                                        • Cotton Mather, Salem Massachusetts, 1692
                                        X 1 Reply Last reply 3 Feb 2021, 19:10
                                        • J jon-nyc
                                          3 Feb 2021, 19:08

                                          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.

                                          X Offline
                                          X Offline
                                          xenon
                                          wrote on 3 Feb 2021, 19:10 last edited by
                                          #20

                                          @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.

                                          J 1 Reply Last reply 3 Feb 2021, 19:11
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