# Tax deduction on mortgage interest being chopped **URL:** \ **Category:** Great Debates\ **Created:** [November 28, 2012, 3:56pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374 "2012-11-28T15:56:05Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![Throatwarbler\_Mangrove](https://avatars.discourse-cdn.com/v4/letter/t/8c91f0/32.png) [@Throatwarbler\_Mangrove](https://boards.straightdope.com/u/Throatwarbler_Mangrove)\ **Post date:** [November 30, 2012, 4:04am UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/61 "2012-11-30T04:04:46Z")
> [@Voyager](#): > > Actually people are less rich, because they pay a higher percentage of their income on housing in order to be able to handle a house close to where they work. Those who couldn’t went to the outlying areas and commuted three hours a day. And they got screwed even worse than the people living close to Silicon Valley since purchases with money could now afford a close-in house and didn’t want a far away one. > > The fact is that towns close to the jobs are built out and are considered highly desirable because of proximity and because of the good schools - which are good because people who can afford the houses send their kids there. What you choose to spend your income on doesn’t make you more or less rich. If you spend 100% of your income of $100k on Hostess Ding Dongs, and I only spend 50% of my income of $30k on Hostess Funyuns, it doesn’t fucking matter that you now have less money than me to spend on Funyuns instead of Ding Dongs because your income is $100k and you are richer than the guy who makes $30k. It’s as if these shitty piles of 2x4s and gypsum board are some kind of reality distortion field, as soon as people get close to one they no longer know which side is up. ---
**Author:** ![CurtC](https://avatars.discourse-cdn.com/v4/letter/c/ce73a5/32.png) [@CurtC](https://boards.straightdope.com/u/CurtC)\ **Post date:** [November 30, 2012, 4:08am UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/62 "2012-11-30T04:08:52Z")
But Funyuns are a Frito-Lay product! ---
**Author:** ![Throatwarbler\_Mangrove](https://avatars.discourse-cdn.com/v4/letter/t/8c91f0/32.png) [@Throatwarbler\_Mangrove](https://boards.straightdope.com/u/Throatwarbler_Mangrove)\ **Post date:** [November 30, 2012, 4:12am UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/63 "2012-11-30T04:12:21Z")
> [@CurtC](#): > > But Funyuns are a Frito-Lay product! Well shit. :o ---
**Author:** ![bengangmo](https://avatars.discourse-cdn.com/v4/letter/b/50afbb/32.png) [@bengangmo](https://boards.straightdope.com/u/bengangmo)\ **Post date:** [November 30, 2012, 4:15am UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/64 "2012-11-30T04:15:42Z")
Shouldn’t it be simple? Tax deductions should be either for a) Investments b) Stuff with “good” externalities (kids, education, health insurance) If it is a family house = not tax deductible, at the same time, it doesn’t attract capital gains. Solved. Wouldn’t that be easy? ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [November 30, 2012, 6:22am UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/65 "2012-11-30T06:22:03Z")
> [@Really\_Not\_All\_That\_Bright](#): > > I was actually referring to deducting the compounded interest, rather than just the yearly interest on the remaining principal. Each year you get to deduct the interest you paid that year. Hence the deductible amount decreases each year as payments become more and more weighted towards paying off capital. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 30, 2012, 7:09am UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/66 "2012-11-30T07:09:51Z")
> [@Throatwarbler\_Mangrove](#): > > What you choose to spend your income on doesn’t make you more or less rich. If you spend 100% of your income of $100k on Hostess Ding Dongs, and I only spend 50% of my income of $30k on Hostess Funyuns, it doesn’t fucking matter that you now have less money than me to spend on Funyuns instead of Ding Dongs because your income is $100k and you are richer than the guy who makes $30k. > > It’s as if these shitty piles of 2x4s and gypsum board are some kind of reality distortion field, as soon as people get close to one they no longer know which side is up. If the “rich” guy is living in a place where a minimal number of calories is costing him $50K a year, he isn’t rich. You seem to think that if people looked harder they can find $200 K houses. I invite you to look through real estate listings for Sunnyvale and Cupertino and find some. ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [November 30, 2012, 1:06pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/67 "2012-11-30T13:06:20Z")
> [@Voyager](#): > > If the “rich” guy is living in a place where a minimal number of calories is costing him $50K a year, he isn’t rich. You seem to think that if people looked harder they can find $200 K houses. I invite you to look through real estate listings for Sunnyvale and Cupertino and find some. But Sunnyvale and Cupertino aren’t the only places to live. Someone said earlier that $1 million gets you 1000 square feet in Manhattan. I’m sure that’s true- for some parts of Manhattan. But not for all. People who might consider that 1000 sq foot apartment in Manhattan simply wouldn’t consider living in the less expensive neighborhoods of NY. Twenty five years ago, I had a coworker with the same income as me. He paid the same amount of money to rent one quarter of a one-bedroom apartment in Manhattan as I paid to rent a whole one-bedroom aapartment in Queens. He may not have been richer than me because he lived in Manhattan , but he wasn’t poorer because he paid the same amount for less space. ``` Housing prices go up because people are willing to pay-either because of the neighborhood or an easier commute or whatever. If a person can afford a 500K house in order to avoid a three hour commute, that person is wealthier than the person who cannot afford the 500K house and has no alternative to the three hour commute and he is just as wealthy as the person who can afford the $500K house but opts for the three hour commute instead. ``` ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 30, 2012, 2:26pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/68 "2012-11-30T14:26:27Z")
> [@amarone](#): > > Each year you get to deduct the interest you paid that year. Hence the deductible amount decreases each year as payments become more and more weighted towards paying off capital. The interest you _paid_, or the interest that accrued? ---
**Author:** ![CurtC](https://avatars.discourse-cdn.com/v4/letter/c/ce73a5/32.png) [@CurtC](https://boards.straightdope.com/u/CurtC)\ **Post date:** [November 30, 2012, 2:29pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/69 "2012-11-30T14:29:47Z")
> [@doreen](#): > > If a person can afford a 500K house in order to avoid a three hour commute, that person is wealthier than the person who cannot afford the 500K house and has no alternative to the three hour commute… An alternative is always to move to Oklahoma City, to a market where you can afford a house. I’m not one to think of the mortgage interest deduction as a subsidy, but I don’t think people should be defending it by saying that they need help to live in a place with crazy-high housing prices. No one has to live there, and if it’s too expensive, then your option is to live somewhere else. ---
**Author:** ![CurtC](https://avatars.discourse-cdn.com/v4/letter/c/ce73a5/32.png) [@CurtC](https://boards.straightdope.com/u/CurtC)\ **Post date:** [November 30, 2012, 2:32pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/70 "2012-11-30T14:32:12Z")
> [@Really\_Not\_All\_That\_Bright](#): > > The interest you _paid_, or the interest that accrued? The interest you _paid_. Although there’s not really a difference. Every month, the mortgage holder calculates the interest on the outstanding balance _for that month_, and when your payment arrives, it takes some of your payment to pay that monthly interest, then whatever is left over is applied to reduce the outstanding balance (principal). ETA: The only time there could be a difference is if you’re not paying the interest that accrued, and in that case you’d be defaulting on the loan. But in that case, you can only deduct the interest that you’ve paid, not whatever the bank says you owed. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [November 30, 2012, 2:36pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/71 "2012-11-30T14:36:56Z")
> [@CurtC](#): > > An alternative is always to move to Oklahoma City, to a market where you can afford a house. I’m not one to think of the mortgage interest deduction as a subsidy, but I don’t think people should be defending it by saying that they need help to live in a place with crazy-high housing prices. No one has to live there, and if it’s too expensive, then your option is to live somewhere else. But that’s ridiculous. Everyone can’t move to OK City, and it makes no sense to use the poorest part of the country to define what “rich” is. I’m sure there are average people in OK City who would be “rich” by your definition if they moved to Montana or someplace with no jobs. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 30, 2012, 2:47pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/72 "2012-11-30T14:47:09Z")
> [@CurtC](#): > > An alternative is always to move to Oklahoma City, to a market where you can afford a house. I’m not one to think of the mortgage interest deduction as a subsidy, but I don’t think people should be defending it by saying that they need help to live in a place with crazy-high housing prices. No one has to live there, and if it’s too expensive, then your option is to live somewhere else. Even assuming that makes sense on an individual level, it doesn’t work at all on a societal level. People in Manhattan and Beverly Hills and Vail need housekeepers and gardeners, just like everyone else, not to mention police officers, teachers, firefighters, DMV clerks, waiters, and so on. > [@CurtC](#): > > The only time there could be a difference is if you’re not paying the interest that accrued, and in that case you’d be defaulting on the loan. Okay, that makes sense. ---
**Author:** ![Acsenray](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/acsenray/32/4519_2.png) [@Acsenray](https://boards.straightdope.com/u/Acsenray)\ **Post date:** [November 30, 2012, 2:49pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/73 "2012-11-30T14:49:50Z")
> [@CurtC](#): > > I don’t think people should be defending it by saying that they need help to live in a place with crazy-high housing prices. No one has to live there, and if it’s too expensive, then your option is to live somewhere else. The places where housing prices are high happen to be the places _where the jobs are_. This is basic economics. > [@Really\_Not\_All\_That\_Bright](#): > > Even assuming that makes sense on an individual level, it doesn’t work at all on a societal level. People in Manhattan and Beverly Hills and Vail need housekeepers and gardeners, just like everyone else, not to mention police officers, teachers, firefighters, DMV clerks, waiters, and so on. Yes. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [November 30, 2012, 3:10pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/74 "2012-11-30T15:10:08Z")
> [@Acsenray](#): > > The places where housing prices are high happen to be the places _where the jobs are_. This is basic economics. Yes and no. I live in Si Valley where there are oodles of tech jobs and housing prices in most of the area are astronomical. But there are lots of really good tech jobs in places like Seattle and Austin, where housing prices are much lower. In large areas of the Bay Area, there simply is no more land (or not much land) to build new homes, so the supply is not free to meet demand. But one big reason people like living here is the weather, not just the jobs. When I worked in the tech business, I had lots of opportunities to move to cheaper places, but I like it here. I don’t like 120 deg days in the summer or endless rain 9 months out of the year. YMMV. ---
**Author:** ![Acsenray](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/acsenray/32/4519_2.png) [@Acsenray](https://boards.straightdope.com/u/Acsenray)\ **Post date:** [November 30, 2012, 3:19pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/75 "2012-11-30T15:19:48Z")
> [@John\_Mace](#): > > But there are lots of really good tech jobs in places like Seattle and Austin, where housing prices are much lower. Are you suggesting that if Silicon Valley people just gave up the desire for good weather, enough of them could be accommodated in Austin and Seattle such that housing prices in the Bay area would be equalized? ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [November 30, 2012, 3:35pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/76 "2012-11-30T15:35:10Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Even assuming that makes sense on an individual level, it doesn’t work at all on a societal level. People in Manhattan and Beverly Hills and Vail need housekeepers and gardeners, just like everyone else, not to mention police officers, teachers, firefighters, DMV clerks, waiters, and so on. They do. But the police officers, waiters, teachers ,DMV clerks etc. who work in Manhattan generally don’t live in Manhattan and certainly not in the super-expensive parts. I’m sure the same goes for Beverly Hills , Vail and any other expensive areas. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [November 30, 2012, 3:38pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/77 "2012-11-30T15:38:17Z")
> [@Acsenray](#): > > Are you suggesting that if Silicon Valley people just gave up the desire for good weather, enough of them could be accommodated in Austin and Seattle such that housing prices in the Bay area would be equalized? No. I am suggesting that availability of jobs is not the only cause of high housing prices. Weather is also a cause, but those two together are also not the only causes. ---
**Author:** ![Dogzilla](https://avatars.discourse-cdn.com/v4/letter/d/e480ec/32.png) [@Dogzilla](https://boards.straightdope.com/u/Dogzilla)\ **Post date:** [November 30, 2012, 3:51pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/78 "2012-11-30T15:51:19Z")
> [@Really\_Not\_All\_That\_Bright](#): > > In that case, how _you_ doin’? 😃 Okay, repealing the mortgage deduction will probably fuck you, then. Yes, but lowering the cap would not, so I’d be okay with that. Repealing altogether however… :: sigh :: ☹ ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [November 30, 2012, 6:39pm UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/79 "2012-11-30T18:39:32Z")
> [@Really\_Not\_All\_That\_Bright](#): > > The interest you _paid_, or the interest that accrued? You get to deduct interest paid. ---
**Author:** ![Throatwarbler\_Mangrove](https://avatars.discourse-cdn.com/v4/letter/t/8c91f0/32.png) [@Throatwarbler\_Mangrove](https://boards.straightdope.com/u/Throatwarbler_Mangrove)\ **Post date:** [December 1, 2012, 2:38am UTC](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374/80 "2012-12-01T02:38:52Z")
> [@doreen](#): > > They do. But the police officers, waiters, teachers ,DMV clerks etc. who work in Manhattan generally don’t live in Manhattan and certainly not in the super-expensive parts. I’m sure the same goes for Beverly Hills , Vail and any other expensive areas. If only there were some kind of market based solution to entice people to move closer to these places to make up for the higher cost of housing, I mean you could just pay them more but that seems to be at odds with my “Fuck you, more money for me” Republican principles. So obviously the government should just give more money to people who own expensive houses. [Previous page](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374.md?page=3) [Next page](https://boards.straightdope.com/t/tax-deduction-on-mortgage-interest-being-chopped/642374.md?page=5)