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JLeslie's avatar

What do you think the chances are The President and Congress get rid of mortgage interest and property taxes being a deduction on federal income taxes?

Asked by JLeslie (47552 points ) November 29th, 2012

I highly doubt this will happen, but I wondered what the collective thinks.

If they did get rid of the deduction do you think it would happen as soon as for 2012 taxes?

My accountant made it sound like it really might happen, but I think he is pretty right wing, southern, etc., go ahead and go with the stereotypes in this case, so generally I think he thinks the sky is falling with Obama as President.

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18 Answers

janbb's avatar

From what I hear, it is Republicans who are talking about closing “loopholes” and capping deductions more than Democrats. But whether it, or anything will happen, I don’t know. And I doubt it could effect this year’s taxes anyway.

bkcunningham's avatar

The democrats hold, and have held for over five years, the majority in Congress. That along with a democrats holding the executive branch, any changes will be from the democrats. If you don’t trust your accountant, @JLeslie, who can you trust dear? With this do nothing Congress, nothing is going to change.

janbb's avatar

@bkcunningham The Republicans do have the majority in the House; the Democrats in the Senate. But I agree with you that not much will change.

JLeslie's avatar

@bkcunningham I am pretty sure some things are going to change. The Republicans are going to agree to some changes, they can’t keep preaching the impossible forever. Quite a few of them seem to understand what they say to get votes is not realistic for solving the debt problems of the country. It is curious to me what the average Republican is going to think when some Republican congressman go along with taxing people more. I would feel bad for the politicians, but they put themselves into their own box.

I don’t know what trust has to do with whether my accountant thinks he has a crystal ball or not. I called to ask him about paying part or all of my property taxes this year or piling them into next year with my 2012 taxes, and he simply gave me a warning that if tax laws change waiting might work against me, but with laws as they are now, I should delay past Jan 1. My response to him was I am not worried about the property tax write-off changing, especially not for 2012 taxes (meaning filed in 2013). He kind of mumbled we can’t be sure. He was just trying to warn me about some of what is being said in the news about tax law, I appreciate that.

Jaxk's avatar

It seems unlikely for the 2012 tax year. The last I heard from Obama is that he wants the rate hikes on the rich and that is it. No budget cuts or deduction changes. I suspect that when they get down to the tax negotiations next year, any spending cuts will be balanced with further tax hikes. That is when the mortgage and other deductions will come into play. It may be retroactive to the beginning of 2013 but I doubt that will happen easily. More likely it will be effective the beginning of 2014. That will put the Democrats in a better position for the 2014 midterm elections, before anyone has actually paid thier 2014 taxes. It’s all very strategic and timed for the election cycle. But assuming Obama wins this rate hike this year, he will very likely be going back to that well many more times before he’s through.

wundayatta's avatar

I don’t understand why the Republicans prefer eliminating deductions for the middle class to increasing taxes on the rich. They must really owe the rich big time.

However I do hear that the home mortgage deduction may not be eliminated for the middle class. It may be phased out for people with higher incomes. Or bigger houses. Or something that would target it at wealthier people.

I think people will be really pissed off if the home mortgage deduction is eliminated. I mean, really, really pissed off. So I suspect it’s a non-starter.

elbanditoroso's avatar

Absolutely no chance at all. They all talk a good game, but in the end, if the get rid of those deductions, the house and senate lose BIG at the next election.

No politician willingly commits suicide.

JLeslie's avatar

I basically was thinking like @Jaxk and @wundayatta. If it happens it would not go into effect until 2013 or 2014, and I also think getting rid of these things is extremely unlikely. The backlash would be really bad.

@wundayatta I hadn’t heard of only getting rid of the deduction on higher income or larger houses. If they are going to do something like that I think capping the amount to write off is more fair and more palatable.

Jaxk's avatar

@JLeslie

Obama’s plan has been to curtail the deduction only for the top two tax brackets. Even that has a lot of opposition but Obama has been fairly immune to opposition so far. I haven’t heard any arguments that really affect the home interest deduction for tax brackets below the top two. Obama is pretty consistent in funding his government from the top earners.

JLeslie's avatar

@Jaxk I looked at your link. I would need to study the itemization tax forms to understand exactly what it means to only tax at the 28% for property taxes and interest. I don’t think of it that way. I think of it reducing overall income that is taxed. If it simply limits the deducation by a few percentage points for top earners I am ok with that.

Jaxk's avatar

@JLeslie

The way I read it, if you made $250K your itemized deductions could be no more than $70K (250K times .28). It gets a little complex but that’s the way I read it. As with most of the Obama proposals, he is trying to assure the middle class that they won’t be affected. It will be somebody else that pays the freight. Home owners in San Francisco or New York will see a pinch but a home in Nebraska would have to be pretty massive to see interest deductions of that size.

JLeslie's avatar

@Jaxk So, just to make sure I understand, sorry to be so daft, all itemized deductions, so that does that also include state sales tax paid, charitable donations, along with property taxes and mortgage interest? Maybe medical expenses too? Or, is that a separate thing?

Jaxk's avatar

@JLeslie

Yes. All that stuff. If you need to itemize it, it would be governed by that cap.

JLeslie's avatar

@Jaxk Thanks. I had not really understood that previously. It doesn’t seem unreasonable to me. It surprises me the Republicans prefer this to actual increases in the brackets. Although, how much do deductions really add up to usually? I need to go back to your link. Do people actually have deductions over 28% of their income? It can’t be very common. Not even among the top 1 or 2%.

Jaxk's avatar

@JLeslie

Apparently they do since Obama expects to get $321 Billion from this. Republicans (at least me) prefer this to raising the brackets because it doesn’t affect those that have reasonable financial situations. If you raise the brackets, you raise taxes on everyone in those brackets. Personal income and business incomes that may very well be doing everything right and paying a shitload of taxes already. If you try to reduce the loopholes (that covers a lot of ground) you only affect those that are operating on the edge, operating in the grey areas of the tax code. I don’t have a problem with raising the taxes on someone that is earning 250K and paying no tax or very little tax (closing thier loopholes) but I am reluctant to raise taxes on those that are already shouldering thier full share of taxes. At least that’s my opinion.

DrBill's avatar

not going to happen, it would cause too much outrage with voters, and tax laws cannot be retroactive. If they were to enact such a change, it would take effect the first day of the next calendar year, which are the taxes due at the end of that year.

If they were to pass it today, the earliest it could take effect would be 1–1-13 payable in 2014.

Ron_C's avatar

If Obama goes along with the elimination of mortgage interest and property tax deductions, there won’t be a democrat as president for a really long time. Going along with eliminating the only valuable tax deductions available to the middle class will be traitorous act.

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