While the American Taxpayer Relief Act of 2012 reduced the impact of the Pease Limitation, it is still around, and it can greatly limit itemized deductions like mortgage interest and charitable gifts.
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Their plan would scrap most deductions or offer 12.5% non-refundable tax credits for big items like mortgage interest and charitable deductions while lowering rates, expanding brackets and expanding the base of tax revenue.
And this makes sense, because in general, the middle class are more dependent on things like mortgage interest and state and local tax deductions than their wealthy brethren, and the elimination of those deductions would have punished those taxpayers to a greater extent than they would have benefited from the 20% reduction in their tax rate.
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They include popular items like the mortgage interest deduction, tax-free health insurance, and the charity deduction.
They're helping people build wealth through tax deductions, things like the home mortgage interest deduction.
These features include big-ticket items like the deductibility of mortgage interest and employer-paid health insurance premiums, plus myriad small but senseless other provisions.
Behind the emotional appeal of paying off the mortgage is an economic fallacy that goes something like this: That mortgage has so much interest built into it that you wind up paying for the house two times over.
Like any interest rate, mortgage rates have to be considered in the context of inflation.
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Wholesale lenders competed aggressively for market share by undercutting the banks and creating sexy new mortgage products like home-equity, interest-only and low-documentation loans.
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Those policies are based on exactly the kinds of administrative measure that Naughton highlights, and as yet the government has not used widely recommended market mechanisms like raising interest rates (though the new real estate measures do directly raise mortgage rates and the overall cost of capital for housing).
Moreover, both would make their plans optional, like Mr McCain's, and retain a few cherished tax breaks, on mortgage interest and donations to charity, presumably in an effort to placate suspicious primary voters.
Like the monthly payments of a mortgage, monthly car payments are divided between paying principal and interest, and the amounts dedicated to each vary from payment to payment.
Fannie and Freddie were surely problematic as were numerous subsidies for home buyers (think the mortgage interest deduction among many others), but then housing soared in places like England and Canada where these subsidies are mostly non-existent.
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The biggest deduction that most people worry about losing is the one for home mortgage interest, a holdover from when the deductions for other forms of interest like credit cards and auto loans were eliminated in the 1986 tax reform law.
But to make it revenue-neutral, as he says he would like to do, would require ending popular deductions, for example those on charitable giving and mortgage interest.
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