Friday, July 22, 2011

Homeowners---WHY are we ENTITLED to the Home Mortgage Interest Deduction? I really want to know...

Here goes...I live in a house. I got a loan to buy my house. I pay 12 monthly payments to my bank in a calendar years time. Four things are a part of each payment--(1) the principal on my loan, (2) the interest I pay for my loan, (3) property taxes that go to various local governments and (4) payment for homeowners insurance.

The principal is the amount of my loan I actually pay-off on the loan over the year. The bank keeps the interest. The bank submits the money withheld for taxes to the respective local government entities. The banks sends the money collected from me to the insurance company that insures my home.

When I do my Federal income taxes and determine I can itemize deductions (as opposed to taking the "standard deduction"--that is another lesson), I deduct from my taxable income the amount I already paid in taxes to the local governments. This keeps me from being taxed twice on the same income. I get this and it makes total sense.

I can also deduct the INTEREST I paid on my loan that I accrued during the year. This reduces my income that is subject to Federal taxation, hence I pay  less in Federal taxes.  I clearly see how this benefits me. But, WHY am I ENTITLED to this deduction? I know the political reason for this ENTITLEMENT: It is to encourage people to buy homes (voters), perhaps more home than they can afford (that is ANOTHER issue); home builders and real estate agents use it as a selling tool (interest groups, political donors); and doggone it, I have become so use to it I feel ENTITLED to it (voter, again).

So, those of you in my position too, other than it allows us to pay less in taxes, WHY are we ENTITLED to this subsidy/tax break? How can it be justified? Has this subsidy become so ingrained that we feel ENTITLED to it?  Remember, your justification may also be use by someone defending their Subsidy/tax break.

If you did not notice, I believe this has become an ENTITLEMENT for the upper middle class to upper class (especially) of taxpayers.  I have done nothing to receive this subsidy, other than qualify for a loan.

Where am I going wrong?? Respectful in tone responses welcome...
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