The DMV is so insidious. They are allowed to tax used property sales.

I will, and while you're pouring gas in your gas hog, I'll keep on getting
35 mpg in my saturn. So, I guess it's all in how we decide to flush eh?

 

I hadn't checked the tax tables, but I knew a lot of folks paid little
if any federal taxes. Part of it depends on your definition of poor also.


Matt

 

What gas hog? At least I get something back for my gas money. And I
know exactly what I'm getting.


Matt

 

HAHAHA. I love watching you bush-loons go berzerk.HAHA

 

Wow... Is this really the way a "Loving Person" talks?

 

And that's precisely what this is. You have to pay for your housing no matter
what (unless you live in a cardboard box or underneath a bridge somewhere). So
if you apply your housing payment to a rental, you get no tax benefits, whereas
if you apply the same amount to a mortgage, you get to write off most of it as
interest.

 

What's the difference between spending money you don't have on lottery tickets
and spending money you don't have on cars, boats, furniture, clothes, jewelry,
or any number of other things that people buy but cannot afford?

The problem is not lotteries, or even gambling. The problem is spendthrift
people, who overextend themselves, declare bankruptcy, and leave honest,
fiscally responsible people like you and me stuck paying off their bad debts
through higher taxes, interest rates, and fees.

If we would just throw these deadbeats in prison and make them pay restitution
through the money they earn by picking up garbage by the side of the road or by
making license plates, we'd all be better off.

 

Ain't that the truth. By buying a Saturn, you flushed at least $2000 - $3000 of
your hard-earned money down the drain (and into the dealer's pocket), thanks to
Saturn's "no-haggle" pricing.

 

Two obvious problems with your strategy:

1. It typically costs more to buy a similar property to what you can
rent. So, although you are building equity, you are often paying more
for the privilege.

2. You don't get to write off "most" of it as interest. Even the
current highest tax bracket gets you a 35% write-off. One third doesn't
count as "most" by any reasonable definition of the word. And few
people are in the 35% bracket; most are in the 15 or 25% range. This is
even farther from "most."

I'd be curious how you do your calculations to come to the conclusion
you stated. If you are talking about the fact that in the early years
of a mortgage, the lions share of your payment goes to interest rather
than principal, that is certainly true. But in those years you also
aren't building any equity and are really no better off than renting,
other than the 15% or so tax deduction. You are simply paying a lending
company rather than a landlord.

By the time you add on the additional costs associated with owning a
home vs. renting (maintenance, property taxes, etc.), the 15-25% tax
advantage is soon gone.



Matt

 

When I first moved to SoCal in 1995, I was paying $1400/month to rent a 1500SF
3-bedroom house. A year and a half later, I bought my first house, a 2200SF
4-bedroom; my mortgage payment was $1900/month. I was actually paying less per
square foot to own than I was to rent, even before factoring in the tax
benefits.

Even if you must pay more, it's always better to pay your own mortgage than to
pay your landlord's.

In the early years of a mortgage, the vast majority of your payment is interest;
relatively little of your payment is applied to the reduction of your principal.
All of that interest lowers your taxable income.

Looks like you figured it out - see below.

And that's all I was saying.

You're forgetting about this little thing called APPRECIATION. Using the same
example as before, the house I bought in 1997 for $317,000 sold for $525,000
4-1/2 years later. Even after you subtract the realtor commission and all the
interest I paid, I came out WAY ahead of where I would have been had I continued
renting that 3-bedroom house for another 4-1/2 years.

Whatever you say.

BTW, thanks to all the profit I made from my first house, I now own TWO houses,
and can write off the mortgage interest from both of them. I'm actually looking
forward to filing my taxes this year...

 

You write off the interest, i.e. deduct it form your earnings. The
tax deduction subsidizes your housing. It doesn't pay the full cost.

That is true only if houses are not appreciating. As a long term
trend they have always appreciated in the past and are likely to
continue to do so.

In other words, renting is inherently cheaper than buying? That
raises the question of why the government is subsidizing buying over
renting.

 

Well for one, it is apparently addictive for some people and at least
when you buy a car or a boat or jewelry you have something to show for
it at the end of the week.

Actually, one of the biggest causes of bankruptcy now is medical
bills. Add in unemployment, high housing costs and generally the fact
that many people are scraping by paying for essentials and you get a
better picture of why people declare bankruptcy. There are of course
examples of spendthrifts and addicts (including gamblers) who's habits
lead them to bankruptcy, but they are a minority.

I don't know about you, but my taxes and interest rates are generally
going down. My mortgage rate is below 5%. George Bush cut about
$3000 off my income tax and my rising income reduces the rate I pay
for Social Security every year. Not sure what fees you are concerned
about. I don't pay much in bank fees at all.

If you are carrying debt on your credit cards, you are certainly
paying a lot in general. If this describes you, you may be the next
'spendthrift' in bankruptcy court.

So the guy who couldn't pay his bills earning $15,000 per year at
WallMart; we're going to put this guy in a $50,000 per year jail cell
and credit his labor at $1.00 per hour (typical prison wages) to pay
off his debts? What other great plans do you "conservatives" have for
us?

Maybe we could just raise the minimum wage.

 

It's true that poor peole pay little or no Federal income tax. They
can even get an Earned Income Tax Credit that can get them a modest
return in excess of their withholding. Poor and even many low-middle
income wage earners pay more in Social Security than in Federal income
tax. That's why income tax is going down and SS is going up.

Which brings us to the point of poor not getting benefits. You can
argue that the government should not subsidize housing for the poor,
but it is then hard to argue that the government should subsidize
housing for the rich (mortgage interest deduction.) You absolutely
can not argue that subsidies for the poor don't make much difference.
For many families, that is all that is between them and the street.

Of course the latest proposal (from none other than Alan Greenspan)
isn't to cut housing subsidies, it's to cut SS benefits. Now they
aren't even pretending that this is to "save Social Security" but
rather it will be necessary to keep the deficit from going out of
control(!). So the poor are paying (too much) for a
retirement/insurance plan and we have to reduce the benefits of that
plan because the government needs the money after it gave big tax cuts
to the rich. Is this what Bush meant by 'compassionate conservatism'?

 

A grudging acknowledgement that you can't get blood from a stone.

 

Actually, it usually costs less per month; the trick is coming up with
the down payment.

You're misunderstanding -- unless you are subject to the AMT you can
deduct ALL the mortgage interest on a primary residence.

Not even close.

 

I understand completely, but interest is a deduction, not a tax credit,
so you don't save $1 in tax for each $1 in deducted interest. You only
save the $1 times your marginal tax rate.


Matt

 

Are you saying that you can't take your state income tax as a deduction
on 1040 Schedule A, Itemized Deductions?

Since when did that stop the bastards?
[/QUOTE][/QUOTE][/QUOTE]
Subscribe today to "Fire in the Hole - the Quarterly Journal
for Incinerator Toilet Enthusiasts" -- Andrew

 

It's not that hard - it just takes time. The real problem is most people have
trouble living within their means, much less far enough *below* their means in
order to accumulate liquid funds for use as a down payment.

I have a friend who moved to SoCal a couple of months after I did. He lived in
MD, where he owned a townhouse (which he sold). Eight years later, he still
lives in a rented house... but he has a brand new car, and a big screen TV.

For some, coming up with the down payment is much more than a trick...

 

Good point.

At least those people have some excuse (although one wonders why they were not
responsible enough to carry adequate medical einsurance). But I'm talking about
the people who live way beyond their means, and do so with the full intention to
just walk away leaving their creditors holdig the bag if/when they get into
trouble.

Murderers are a minority, too - that doesn't make what they do right (or even
acceptable).

Your interest rate, low as it is, would be even lower if it weren't for people
defaulting on their mortgages. The same is true for any other loans you may
have, such as a car loan or a HELOC.

Are you kidding? Those bad boys get aid off EVERY month. Carrying a balance will
kill you financially.

 

In some cases they were, and the insurance company used some excuse to deny
the
claim. In other cases they want insurance but don't work for an employer
that
provides it, there are millions of people out there who work part time for
employers
who make sure they never work enough hours a week to qualify for full time
status
and thus benefits.

Very few have this attitude, because there's no point in doing this, you may
as
well just go ahead and steal and scam people. The people that do have this
attitude generally go into crime as a career.

Frankly, most of the people who do this are simply not very intelligent
people.
Maybe they have also been shielded most of their lives and don't know any
better.

But, the majority of personal bankruptcies aren't stupid people living way
beyond their means. What they are, is people who had good jobs for
years, and thus made a bunch of financial commitments which they had
no problem meeting with those jobs. Then one day they suddenly
lost their job or had some problem, and now they have no income, but
they still have the commitments. They figured they would be able to get
another job soon or whatever, so they did not start the process of
disentangling
themselves from those commitments. After all how many people do you
know who lose their job then the next day put their house up on the market
with the intent of selling it and buying a much smaller one? Then that
job never materializes and 2 years later they have no money, no insurance,
a stack of bills, and then they get cancer or have a heart attack, that will
certainly bankrupt most people.

This is utter bullshit. When someone defaults on a mortgage, the home goes
back to the bank, who simply resells it. The bank thus loses nothing, in
fact
gains money in many sales. So you going to argue that the bank has to raise
interest rates because of all the money they are making on defaulted
mortgages?

Car loans are either made by the car companies who all own finance houses,
or banks, and both entities get the car if the owner defaults. For used
cars
that are financed from a bank these are generally low enough dollars that
the
money made off interest on the particular car loan easily covers the
principle
by the time the car is worthless and the person defaults (if they default)
Once
again, a system designed so that no matter what happens, the bank either
makes money or breaks even, it never loses money. For automakers who
make loans, well why are you shedding tears over a private company that
loses money on deadbeats? The stockholders of the company suffer on that
one, not you.

And anyway this all misses the point. State lotteries are designed and
marketed
to the poorest and most uneducated people in the state. Sure, some middle
class people who know better buy the occasional lottery ticket. But the
bulk
of the take doesn't come from those people. It comes from the poor person
who cashes his paycheck at the grocery store when he gets groceries then
takes the leftover to the bar and sits in front of the video poker machine
for
the rest of the night until his money is gone. Why do you think that it's
mostly
the scummy retailers that sell lottery tickets, the gas stations, bars, etc?
When
was the last time you went into an upscale retailer and bought a lottery
ticket?

When state lotteries came in they created a whole class of problem gamblers
that WASN'T there before. You can argue that there was always Vegas and
illegal betting, but studies have proven conclusively that in states that
put in
a lottery, that they have had this followed by a rise in problem gamblers.
In
many cases one of the reasons the lottery got voted in was they dedicated a
percentage of the take to programs to rehab these people! So they knew in
advance they would be causing this kind of problem and did it anyway!

It is just another example of the evil of many state governments - they
don't
really give a shit about the people they are supposed to represent, all they
are
is composed of a bunch of bureaucrats who will do anything - including
ruining
lives of people by putting in addictive gambling - just to keep their own
little
fiefdoms funded.

Ted