mortgage deductible from income tax?

[incident]

Why isn't anyone talking about policies for mortgage interest rates being deductible from income tax? Surely this helps first time buyers heaps more than just playing around with LVR policies trying to drive down property prices without much luck.

[Anthonyacat]

I'd imagine mostly because no one is trying to help first home buyers. Not really. The main aim of the LVRs is to stabilise the banks (and thus, wider economy) in case of a property crash.

Deductible private mortgage debt wouldn't help stabilise the economy at all, and would reduce the government's income enormously!

As of June 2016, mortgage debt was $217.5 billion. Meanwhile, even at historically low rates, 63% of people own their own home. While to my knowledge it's impossible to quantify how much of the mortgage debt relates to own homes versus rentals (where the interest is already deductible) it's fair to say that peoples own homes are more expensive than their rentals, so taking that 63% is probably not unrealistic.

That makes $137 billion of mortgage debt, or $6.85 billion of interest (at 5%). Is between $720m and $2.2b of tax deductions that I'm sure the gov't isn't keen on losing.


But beyond all that, this policy wouldn't advantage first home buyers. It would advantage all home buyers, or rather disadvantage everyone who rents, whether by need or by choice. If interest on your own home is deductible, the debt is cheaper, you can afford to pay more for the same house, house prices go up more.

[Wayne]

Indeed - it would make things a lot messier than they already are.
You want to reduce house prices to an affordable level rather than increase the number of people who can buy into the inflated housing market.

[incident]

well, they have that in the USA. It should be something exclusive to first time home buyers. Investors get rental income tax reduced..

[Wayne]

well, they have that in the USA. It should be something exclusive to first time home buyers. Investors get rental income tax reduced..

They do indeed - but they have a lot of other tax differances there.
You can't look at one in isolation (credit card interest is deductible also).

[Anthonyacat]

Exclusive to First Home Buyers? That would discourage anyone moving out of their first house, if their second home loses the deductibility perk.

Or did you mean exclusive to people who only own one home, regardless of whether it's their first or their ninth? In that case, what about the people who hold their rental properties in companies? Do they get the deduction, or not? If not, what about people who invest on the stockmarket in companies that own houses? Isn't that the same thing?

Not meaning to push too hard on the negative here, but your suggested solution wouldn't solve anything. It would result in some added tax complexity, which would make some accountants happier. And it'd probably result in higher marginal tax rates, to make up for the reduced taxes coming in from home owners.

[Wellington Broker]

Don't they have an extremely complex tax code in the US?

[Lanthanide]

Andrew Little was talking about taking negative gearing away from property investors.

That's another way to level the playing field.

[Anthonyacat]

Don't they have an extremely complex tax code in the US?

Extremely. Totally nonsensical deductions and requirements. Individuals buy software that tries to approximate the correct things to file, and it still usually has errors or missed deductions.


A ringfencing of property losses is an interesting concept that I think would work to some extent. Adds yet another complication to our own property tax law, though. And creates yet another tax disadvantage for property investors. Everyone thinks property is tax advantaged, but it's easily the least tax advantaged of the investment classes.

[Wellington Broker]

Everyone thinks property is tax advantaged, but it's easily the least tax advantaged of the investment classes.

Go on.....

[jappronz]

Don't they have an extremely complex tax code in the US?

Everyone thinks property is tax advantaged, but it's easily the least tax advantaged of the investment classes.

Also intrigued!

[Viking]

Andrew Little was talking about taking negative gearing away from property investors.

That's another way to level the playing field.

Quite how?
When is a property negatively geared?
What if some of that borrowing or even all is for other business use?

Little is dumb fullstop. He is a miserable clueless control freak who doesn't like to see others succeed.

God help us if he ever gets to be in charge. Just look at his history.

[Viking]

Go on.....

Well we have tenants for a start. Tenants that are propped up by the Tenancy tribunal and anal law that conspires against the property owner.
Perhaps you can draw your own conclusions from that.

[Nick G]

Anything done to level the playing field against investors is sure to precede a rental crisis.

[incident]

what is the best tax advantaged invest that is worth investing in for you then?