Posts filed under “Taxes and Policy”
Here’s some more bad news for John Q. Public:
We all know that the fun of the past few years Housing binge / ATM withdrawal / GDP Party is long since over. But it turns out that the hangover isn’t nearly done.
Why is that? Well, one of the advantages of Home Equity financing is that if you use the proceeds for capital improvements to the home — *new floors, walls or lighting, installing central A/C, removing trees, refurbishing bathrooms, new lawns or gardens — then it has the same tax deductiblity as if it were a primary mortgage.
What abut if you use the proceeds for other, non-capital improvement purposes?
From Realty blog Patrick.Net:
"Word from the IRS is that they are auditing people based on refiances on their
house. If you refied and pulled money out of the house and use for other
purposes than home improvement you can not claim that as Mortgage Deduction,
needs to be claimed as Interest expense. Guess what, they want proof of home
Why do I smell some big trouble coming down the road for some people?
Refi Interest Trap?
March 28th, 2008
* What we did to our home
Back in August of 2007, we looked at the The Ongoing Impact of the Housing Sector.
At the time, I had assigned blame for all of the problems in the credit
market to a variety of institutions and people. The blame went as follows:
* Federal Reserve (FOMC)
* Mortgage brokers
* Federal Government
* Fannie Mae
* Lending banks
* Wall Street firms
* CDO Managers
* Credit agencies
* Hedge funds
* Institutional Investors (pensions, insurance firms, banks, etc.)
* And back to regulatory role of the Federal Reserve
Today’s WSJ has a front page article looking at the same issue: Housing Bust Fuels Blame Game. However, they assess blame somewhat differently, with a bit of a political slant:
Democrats are quick to blame Republicans, who were in
power during the housing bubble and subprime lending frenzy. For years,
America’s leaders failed to restrain the markets, companies, investors
and consumers from the missteps that led to the most pervasive
financial crisis in decades.
But in hindsight, the failure stretches across
government and across party lines. At bottom are two strong currents.
From the Republican president to urban Democratic congressmen,
homeownership was pushed as an overriding and unquestioned goal. And
many significant attempts at regulation were obstructed by the
prevailing belief that the economy did best when financial markets
operated as freely as possible.
While the headline writer tries to call this a "Bipartisan Failure," the bulk of the actual article is find less kind to the GOP. The Journal blamed:
* The Bush administration for cheerleading homeownership and pressuring government-sponsored mortgage lenders
Fannie Mae and Freddie Mac to provide funding for riskier mortgages.
* Congress for allowing Fannie and Freddie to invest
heavily in securities backed by subprime loans.
* While Democratic congressmen
pushed federal law to restrain sub-prime lending practices Republicans (with some Democratic allies) blocked or countered with
* Federal Reserve, Chairman Alan Greenspan,
revered for not using the
Fed’s authority to more aggressively regulate lender behavior.
* California — where the country’s subprime lenders where — saw Democratic state lawmakers
refusing to impose tougher regulations on a
prized local industry.
Perhaps its bias on my part, but that list looks a little one sided to me . . .
graphic courtesy of the WSJ
Housing Bust Fuels Blame Game
Democrats Seize On Opponents’ Role;
GREG IP, JAMES R. HAGERTY and JONATHAN KARP
WSJ, February 27, 2008; Page A1