Much of our mortgage isn’t tax deductible because we aren’t paying all that much interest on it any more. Tho that does remind me, that is one area where we have an affect due to lost income - I used to pay more against the principal of our mortgage when I was working, but that was only about $100 a month.
As for hiding income, I have no idea how rich folks do it but poor people ask to be paid in cash and then don’t claim it. I’m sure some get caught, but of all the folks I’ve known over the years who do that none have ever had any trouble with the IRS.
Which has what to do with what I said?
OTOH, the IRS doesn’t have the manpower to check out every business that might be getting paid in cash - shoot, they can’t even run down those who get paid by check if their income is low enough. And even when they do, the penalty isn’t always all that bad. I was writing off a good chunk of my income many years ago, I thought legally, until one day I got tagged for an audit. I ended up paying back taxes for two previous years, after having written off thousands for well over 10 years, because the auditor agreed that it was sort of a gray area.
However, what I really meant was the “legal” ways to avoid paying income tax, such as one friend who owned an avocado farm until it started turning a profit.
That was pretty stupid. Those that I have known over the years who skim profits don’t try to pay almost no tax.
How could that possibly be, the highest marginal tax rate in that chart is 35%. 35% of $20K is $7k, so at most you would be paying $7K less in Federal taxes, and from what you have written I expect you are in the 28% marginal rate bracket which means you are paying $5,600 less in Federal taxes.
Oh, I did not understand that a loan had to be at gunpoint.
These loans were dreamed up to take advantage of people and to loot their equity. The loans were designed deliberately to take advantage of people,
So you think, no matter how ridiculous the loans were the banks had a right to take their money and homes.?
Lets make it easy for you. The loan=s were dreamed up by bankers. The people who got the loand could not force them to cut down payments and take ARMs. Those were wet dreams of bankers who robbed people blind.
Because he might have a new baby, and no room in his apartment.
Because he was being good and renting and saving, and kept seeing house prices rise faster than he could save. He figures if he had taken the risk and bought a year ago, or two years ago, he’d be relatively rich now.
Because he keeps getting told that home ownership is the American dream.
Because he’s tired of landlords.
Enough?
He probably did. He also probably got told that while it could reset, there was no risk, because he could easily refinance, given that his house would be worth a lot more than he paid for it, since house prices only go up.
No, he probably got steered to a mortgage broker by a realtor. Nothing wrong in that, since the broker who ripped him off was probably legit, and might have been working for one of the largest agencies.
If he was going to a broker operating out of the back of a truck, I’d agree. But he was going to Countrywide, or to a big bank. To a licensed broker. People respected in the community. Sometimes it is not unreasonable to trust someone to be looking out for your interests, to the extent of not ripping you off. Plus, I’m sure the brokers had a nice response to any objection. I guess you think that only people better at finance than a broker should be allowed to buy a house.
What other industry compensates people more for selling dangerous products? Maybe used car salesmen, but they have a reputation. At the time mortgage brokers didn’t. Now of course used car salesmen and loan sharks cross the street to avoid brokers.
Losing it all? The last crash where people could lose it all was long before most people today were born. We’ve heard that the market always goes up during a ten year period.
Dopers have testified how brokers tried to change the terms of the mortgage at the last minute. Have you ever bought a house? You are about ready to move in, you’ve given notice on your apartment, and you’ve no doubt fallen in love with your new piece of the American dream. Not a good negotiating position, especially not when it is the first time and you are presented with a 100 page document with a few places where you initial.
Your position is that anyone not quite smart enough to outwit a professional has himself to blame for getting screwed. Mine is that a professional should have a code of ethics, and anyone violating it and working extra hard to get extra money by selling crap loans should pay for the damages they caused and get tossed in the pokey. Maybe it would teach them a lesson.
That’s one reason for approving a plant before it opens - to make sure they aren’t killing their neighbors. If every business is busy killing its neighbors, so that shutting them down would bankrupt the government, better to have a bit less UHC than a lot of dead citizens.
Now, the loans weren’t designed to rip people off. They were designed to pay higher returns than traditional loans were getting, and to feed the voracious market for chopped up shit paying high interest and rated AAA. People who were well qualified for mortgages and who knew what they were doing weren’t going to take them, so the banks had to market to those who weren’t qualified, cook the process so they could get loans without going through the standard vetting.
That’s why banks called up little old ladies whose homes were paid off and convinced them to take out loans - “to get all that money sitting idly by” - loans which made them eventually lose their homes.
There were plenty of radio ads about getting home equity loans which never mentioned cash flow or paying them back. Maybe our friend thinks that borrowers forced banks to run them?
Well, I did say it was a guesstimate, and math is not my strong suit. However, add the savings we are getting from paying less in state income tax and social security, and the few adjustments I mentioned in my OP and you are right there in the “not really noticing much difference” range.
Not helping your cause with this one. Anyone who has a baby, or another baby, when they don’t have room for it and/or the money to get more room is not exactly someone who should be getting a mortgage.
This one confuses me - are there places where paying a mortgage (not to mention all the other costs of owning a home) is significantly cheaper than renting a comparable place?
These are also in the area of “too dumb to have a mortgage”.
Those who ignore history are doomed to repeat it…
Mine would be a little of the first - anyone who blindly believes they can afford a mortgage based on what “should” happen in the future shouldn’t have one, and most of the last - anyone that sold those crap loans should be forced to pay whatever folks can’t afford on all the mortgages he is responsible for. Not tossed in the pokey tho, we need him out and employed so he can pay his fines!
Wait, so you linked to a table that showed the highest marginal rate is 38% (and your actual marginal rate is probably closer to 28%), and you ‘guesstimated’ that your Federal income tax on $20K would be about $10K? Why even link to it if you didn’t understand what it meant? You really aren’t smart enough to have an opinion worth sharing with other people.
Uh, speaking of smart enough to have an opinion - why in the world would I figure out the tax on $20K? Obviously that wasn’t our income when I was working, nor is it our income now. Or do you think that the tax on a drop in income would be figured all by itself?
Oh I know! You are just making random posts because I disagree with you! Gotcha.
Let’s take an example, we’ll assume that you and your husband’s combined taxable income (this is after deductions) is $157,299 dollars. You pay 10% on the amount up to $16,749, 15% on the amount between $16,750 and $67, 899, 25% on the amount between $68,000 and $137, 299, and 28% on the amount between $137,000 and $157,299.
Now you quit your job and your combined taxable income falls by $20,000 to $137, 299. How much less tax do you pay? That is easy to figure: since you were paying 28% tax on the amount between $137,300 and $157,299, you pay 28% of $20,000 less. That is $5,600.
That 28% tax bracket you were in only applied to the amount over $137, 299. “Dropping back down to the next tax bracket” does not mean you pay less taxes on the income below $137, 299. That stays the same. This is why multiple posters have told you it is impossible to reduce your taxable income by $20,000 and have the reduction in taxes make up for it. In order for that to happen the sum of all your marginal tax rates would need to equal 100%, which they do not by a long shot.
Many people do not understand how marginal tax rates work, and conservative politicians love to exploit that fact. But please don’t give opinions on tax policies until you understand how taxes work.
Really? You are going to freak the hell out because I chose to actually look at it from the standpoint of how much we paid in 2007 as opposed to 2010, instead of ass-uming that 1) the tax brackets stayed the same (they didn’t) and b) that change didn’t make a difference (it did) and c) you are working with all the facts (you aren’t).
And even after all of that? You came up with a number that we’ve already discussed! Do you not even read your own posts??
You probable should take your own advice. Particularly since I haven’t given any opinions on that subject.
Well that’s (what has become) the thing. I made an observation way back on page 2 and was immediately attacked by those who feel they know everything, even tho the facts at hand were extremely few. Because at the time I was on vacation, I lacked the time and interest to set the first twit straight and it just snowballed from there. Eventually I just figured I’d see how deep a hole some of these guys could dig themselves for shits and giggles. It has been, as most of the Pit seems to be, an interesting insight into how some folks think.
Honey, all you did was make yourself look like a fool - anyone who makes pronouncements based on almost no information is doing themselves no good. Such as here - I had no argument, merely an observation. You are the one who tried to argue, without much success. If you want to continue to try to “prove” to me that my observation about my finances are “wrong”, go right ahead but you aren’t going to get anywhere because you simply can’t do it. But if it makes you feel good, I can always use more insight…
Don’t know but I also don’t really care. If nothing else, the opinions and intelligence of strangers on the internet doesn’t concern me much, but in specific here I’ve noticed that a goodly number of the folks that inhabit the Pit don’t seem to use their brains much when it comes to certain topics. So if a majority of the people in this thread, or in the Pit, don’t agree with me - eh.
Let’s see, what do we know so far? Your original claim was that taxes are high, so it may discourage people from working longer hours. As evidence of that you cited your experience that when you stopped working and your $20K income was not missed.
Multiple posters showed that tax rates make it impossible for a reduction in taxes as a result of your lower income to make up for that difference. But you also pay state taxes you say. Sorry, still doesn’t work. Well, you stopped paying an extra $100 in principal against your mortgage. Well duh, if you stop paying an extra $100 a month that means you have more money to pay bills . But this still does not make up for that missing income. Then you link to tax tables to show that you payed $10K in Federal income tax on that $20K, but the table that you linked to clearly shows that is impossible as the highest marginal rate is 38% and you are more likely at a lower rate.
But, you object, the tax rates have changed. I guess that proves your point that lower taxes discourage people from working. But no, that is the exact opposite of what you claimed originally.
But none of this will make a difference, you will go to your after church coffee group and you and your friends will still talk nonsense about being “bumped into a higher tax bracket”, and how Obama raised taxes, and that there is no reason for people to try and get rich anymore as the gummint just takes it all anyway.
And how do you propose each individual transaction is supposed to measure the involved intelligence?
Go buy an organic vegetable at your local megamart and see if the cashier offers to inform you on the money you’re about to waste. Won’t happen.
Go to your local Apple store and see if they’ll spend time convincing you to buy a PC instead. Won’t happen.
That’s not how the world has or ever will work.
My wife and I moved from Canada to the US because she got a job with a considerable pay bump, and for a while we lived of her salary which was slightly more than our combined before we left. When moving, we pretty much kept out lives, so we moved from one downtown to another, and continued renting a similarly sized condo for about the same price.
As we made more and more friends it occurred to us that everyone either owned or was about to. Some of our single friends, making just slightly more than us, had 3 bedroom townhouses. Some had multiple rental properties. I had one friend at home that owned a house, one that owned a condo, meanwhile everyone else rented, my older brother was still renting and would for several more years.
During this time the housing market was red hot. We were continuously reminded how stupid we were for renting. We were told all the things Gonzomax was told about how we could be building equity. How house prices keep going up. Our landlord kept pushing us to buy the unit we were in, each time the price went up.
We took what we were paying in rent, and looked at how much mortgage we could afford. Then we looked at our savings and worked backwards to see what 20% down payment would get us. After that we went looking at condos and houses. At the time we didn’t know about the “buy three times your income” rule.
Right off the bat we noticed that condos and townhouses were happily charging $200-300 for monthly fees. A third of what we wanted to spend on a mortgage! So we scaled down our price and noticed that anything in our price range was garbage. And I mean that literally. It was disgusting what people were trying to offer for $200,000. Shit we wouldn’t even rent.
Then we went to a mortgage broker who gave us the sale. Keep in mind that not only are we financial morons, we were also Canadians. We had no idea how mortgages worked in the US and made most of our assumptions based on Canadian rules. Being Canadian also meant we had no credit in the US, so we were pushed towards subprime loans.
We got the sales pitch everyone else got. We mentioned what we had for down payment and the woman laughed. She said we could put 5% down and use that cash to help make the payments. She said we could get a mortgage for three times our income. And that if we went with 5 year ARM we could lower our monthly payments. We got the same pressure everyone else had.
But the whole thing stunk. Right off the bat we couldn’t comprehend not putting money down, even if the house price would go up. You should have seen the look on her face when I asked what happens if it goes down. She told us about how our salaries would keep going up. But at the same time my wife’s company was starting it’s yearly layoffs.
So we waited, and rented. Meanwhile our rent went up $100 a month, and parking went up a bunch, and we kept feeling that pressure. We kept hearing the commercials, getting the phone calls, emails, harassment. It actually caused a lot of strain our our marriage.
Keep in mind we moved from Toronto and had been used to crazy overpriced condos, and extremely high home prices. But had moved to Minneapolis and there was no way (in our mind) house prices should have been higher.
And then the crash.
Suddenly our landlord offered us a lower price (still way above what it should have been). We kept hearing about foreclosures and house prices falling. So again we went out looking it what was now our price range. These houses were shit. 1.5 story houses from the 20s with the fridge in a different room because the closet of a kitchen couldn’t fit it. Horrible condition, pathetic little yards.
We had an agent take us around to foreclosure properties. He takes us in one that was a third of what they bought it for 2 years earlier and said, “needs a bit of work, what do you think you’d do with it.”
I said, “I’d tear it all down, rebuild the foundation, and build new.” There were other people in the house at the time and everyone actually gasped. Something was seriously wrong with these people that thought at any point this house was worth more than the land it was sitting on.
There was no reason why we were able to avoid this massive financial mess but others couldn’t. And from my experience, the people hit hardest by it weren’t duped by brokers, they were people looking to game the system. They wanted more house than they currently could afford. Just like everything else they had, they wanted more, and they financed to get it.
We managed to find a great little house where the mortgage is less than our rent, and used the $8000 home buyers credit to go to Australia. How many people do you suppose used that $8000 as a way to get more house?
I know you’re not an idiot, so can I assume you got competing bids? Right off the bat I needed some plumbing work done. I brought in three different guys and got bids ranging from $100 up to $1200. One guy even went around my house looking for other things to fix which he called a “free inspection.” They had no problem taking advantage of my ignorance.
Yes, you need to go to a specialist, but how do you know if they’re billing you right? How do you assess the value they provide?
This one is a joke right?
That sounds kind of fun.
Right off the bat, they made the simple mistake of using their combined income instead of something lower. No one’s job is that secure.
Also note that without being able to save 20% they weren’t “savers.” It’s hard to balance your budget such that you can sock away enough for a 20% down payment. But if you are currently living with that budget, you are able to weather the storms.
These “average Americans” you speak of were maxed out, and then maxed out some more. They had zero room for error. Even if the economy hadn’t taken a dive, if it had just gone sideways a bit, they’d still have screwed themselves.
It’s not just about being experts, but think about their financial motive. I guarantee you if you go to a septic guy that specializes in fields, he’ll tell you you need a field. Go to a guy that specializes in tanks and he’ll tell you you need a tank. See the connection?
But people listening were happy to game the system. They wanted equity in their own without having to contribute. We wanted to guess at what rates would be in the future. The people buying were happy to go along with it. And what’s worse, is that they could have gamed it to make their life better the way we did. They could have reduced their monthly payments, and increased their savings rates.
But they didn’t, they willingly choose to buy more house than they could afford, based on what they thought their income would be in the future. That’s not being screwed by a financial charlatan. They expected to use future bonuses, and future pay increases. They maxed themselves out, and then didn’t bother savings.
The US had a negative savings rate! Instead of getting a great deal on a mortgage and banking the savings, they maxed themselves out, then borrowed more. Even people that had equity in their house turned around and got home equity loans!
There were actual cases of fraud and criminal conduct which shouldn’t be ignored. But just because a few people got swindled doesn’t excuse the rest of society from doing their due diligence. The fact that the financial world doesn’t have a code of ethics should give some indication of how much you should trust “experts.”
Which has what to do with what I said?