Oct 17 - 46/45 - McCain +01
New data on the income gap. This is the biggest problem our current economy. I keep hearing we are turning into a service-based economy. Well, a middle class cannot exist if it depends on all service jobs, when those same people guaranteed minimum standards (like health care and a useful minimum wage).
Then there is the problem with giving the rich unfair breaks. I also just learned a new example All those people that were flipping houses in the last few years, do not pay taxes if they kept the house for two years. So those people made up to $600,000 on a home home and did not pay an ounce of taxes on those gains. All the while, those people who were not paying taxes, drove home prices up with their games and now have a lot of average people trying to get into the market priced out. There is a better and more fair way to do this.
The idiot that directly oversaw the Walter Reed Hospital, was given farewell huge party. These people just don't get it.
Republicans claim a withdrawal date from Iraq will cause insurgents to sit back until we leave, then attack again. Why is that so bad? I mean, under this scenario, they will calm down and quit killing Americans in the next year. Then we can focus on training Iraqis and give them a calm before a potential storm. Then in a year or so, if they are not willing to fight for themselves, what can we do? And if full blown genocide starts, we can step in (but it would have to be worse than genocide in Darfur, because that is not enough for us to care).
I fully respect Kyle's decision to yank Bob's post. That is what Kyle is here for. Well, I finally read the post. I think Bob explained himself fully in his follow-up (my comments are down there as well) to where people should feel comfortable with the situation. Either way, I must confess one thing: it was nice to see someone else getting attacked like he was the devil for once (just kidding Bob).
By Chuck - 3/29/2007
45 Comments:
Consider:
A 26 year old making $40,000 as a manager of a department store. Pretty decent living. Well, he cannot afford a house or condo, especially since prices doubled in the last 5 years.
But that guy pays taxes on every single dollar she earns.
Meanwhile, that house flipper does not pay taxes.
What a freaking joke.
and on another note, doesn't that whole insurgents "will wait it out until we leave" be GREAT!. Does that mean they will not kill Americans for the next year? They will just wait for us to leave....what is the problem?
can you clarify. He/she wouldn't pay property taxes or capital gains taxes?? Or would they be exempt from the penlty b/c they were there for two years
Everyone pays property taxes. If you flip a house you still have to pay tax's because you have not lived in it for 2 years or more.
Housing is nuts right now..combined with all those companies giving people loans they can't pay back has created a mess.
You have to pay property taxes just not capital gains on the profits.
Doesn't it also have to be your primary residence for 2 years?
Why should a person be given tax breaks at all for his home owernship. I find the idea of people buying huge expensive homes for ego gratification sad.. That is their right but why should they be rewarded with tax deductions?
kyle is exactly right, and that provision actually helps more middle and lower class people by allowing them to treat their property as an investment to build equity and worth/value in their homes. I do not understand your anger at people being entrepenuers, So people made money flipping houses, it isn't illegal or even unethical, so why are you demonizing it? It is to the point that anytime people succeed, even legitimtely, that you demonize them. The real estate market is a matter of timing, Housing prices are currently dropping and it is now a buyers market. Also your hypothetical isn't even accurate considering the general rule of thumb for mortgages to people with average/decent credit is 4x their annual salary-provided they aren't already a credit risk. 120k will buy you a house in most places-plus at 26 has he been working and saving for a down payment? I don't understand your vitrol towards everything.
Fred, I have never agreed with you more. I'm blown away!
Fred
the tax break is given so that someone selling their primary residency wil not lose a significant portion of the sale price to taxes and allow them to purchase their next primary residency. That is why you have people who buy starter homes, Instead of paying someone else for the right to live in a place(renting), they are paying for something and receiving the long term benefit (equity) of their expenditure. I am amazed that someone who is opposed to estate taxes (if I remember correctly) would be against this simple and resonable protection from capital gains taxes, which can be significant and more that most middle/lower middle class citizens would be able to afford and still pay a reasonable amount for their next residence. This protection does not extend to 2nd homes or vacation properties, it must be the primary residence and you must have paid property taxes for two years.
definition of capital gains tax
"A capital gains tax (abbreviated: CGT) is a tax charged on capital gains, the profit realized on the sale of an asset that was purchased at a lower price. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property. Not all countries implement a capital gains tax."
So kyle buys a house as a single guy, and 4 years from now hes married with kyle jr on the way he needs a bigger house-over that 4 years his house appreciated in value-without this protection, allong with having to buy a new home, incur the costs associated with his growing family he would pay up to 15% of the appreciated value. The appreciation could be due to the work kyle put in in fixing up his house or anything else-even though he already paid taxes on the goods and services associated with the impovement.
"Generally, appreciated capital assets that are sold after being held more than one year (long-term capital gain) will be taxed at a maximum rate of 15%. For the sale of collectibles and small business stock, the capital gain rate is 28%. Appreciated capital assets that are sold after being held less than one year (short-term capital gain) will be taxed as ordinary income, which rises as high as 35% in the progressive tax system."
here is the exception and it isn't the huge boon to the rich that our resident esquire makes it out to be
"A capital gain on the sale of a principal residence is afforded special treatment for Federal income tax purposes. Married sellers of a principal residence may generally exclude up to $500,000 of gain ($250,000 of gain in the case of single individuals) from gross income, provided the real estate was used as the sellers' primary residence for at least two years during the five year period ending with the date of the sale."
terra you will change your tune if you need to sell your house and move.
where did you get that 600k figure from chuckles? If a person buys a house for 400K and sells it for 600K he made a profit of 200K-assuming no new improvements-(appreciation like that is extremely rareover a short time, purely a hypothetical).
NOt only that but one would have to pay the capital gains tax because the value is over the alotted margin.
People selling houses didn't drive the cost of housing up, the people willing to: mortgage their firstborn, come to the table without the advisable downpayment of 20%, and willingness to have astronomical motnhly payments are what drove up prices. You are getting the cart before the horse. I can't sell a house if someone isn't willing to pay for it.
The more I think about your argument the more insidious and vile I find it. Not everyone is going to go and get a proffesional degree to earn a good living in this country, but if I work my butt off, repair houses and do improvements, then sell the house for a profit, you would like to see me crippled by the CGT, and not able to move into my next home. It was my effort and labor that increased the value of my home, not government handouts or anything like that-just my sweat equity. The last time I checked, people who earn their money this way were the backbone of this country and for you to equate it as some kind of scam or rip-off is beyond insulting. I will refrain from the easy attack and the repercussions on society that your proffesion has wrought, because I don't hold you personally responsible, for what a few bad apples may have done-I would appreciate the same courtesy!
Oh and as I stated previously I paid taxes on any goods and services that attributed to increase in value of my house. I am more than willing to show you a home depot receipt-the tax is right their on the bottom line.
along with the property taxes on my homes when i lived in them-again contributing to the betterment of the community
Fred and Terra... can I assume you both pass on deducting your mortgage interest on your taxes?
Getting a mortgage interest deduction is a huge incentive to buy a home and I think we can all agree that owning rather than renting is a positive.
The deduction for interst on an equity loan also encourages people to improve their homes. And yes I know, some people use the money to buy Cavs season tickets or put it up their nose.
I was agreeing with Fred's comment about buying unnecessarily huge homes for ego gratification.
house flipper... ever heard of "sub prime lending"? 80-20 split? Those target people who want a house and can't afford a conventional loan. Banks grant these new special loans to people on the border of being a credit risk, offsetting their own risk by charging higher interest rates. If Chuck's example guy was able to save a down payment, that's great. He probably had some extra income. Sub-prime customers don't. They may be able to afford their house and continue paying their current bills, but not able to afford when something breaks or they need a new car. They're definitely not able to save. Home loans for people who can afford the payment and have saved for a down payment are great, but sub-prime loans hurt people. Sure, they have a house, but their $ cushion is gone.
house flipper... ever heard of "sub prime lending"?
yes I have, again, I am not a lender nor is that the issue up for debate. BY the way you are extremely condescending and rude. If you can't engage in a discussion without being discourteous, please refrain until you can.
"They may be able to afford their house and continue paying their current bills, but not able to afford when something breaks or they need a new car. They're definitely not able to save. Home loans for people who can afford the payment and have saved for a down payment are great, but sub-prime loans hurt people. Sure, they have a house, but their $ cushion is gone"
Home ownership is a risk(as is any purchase), and who are you or anyone else to decide if the risk of purchase is too great for any other person, unless you are the ones loaning them money. I know alot of people that used sub-prime loans to get their first house, Yes it straps you finaincially but the $800/month goes to paying off your purchase as oposed to a landlords pockets. I suppose you have no qualms in telling my friends that used sub prime loans to get their house that they were wrong and stupid because now they don't have a "cash cushion". They would probably laugh at you for assuming they ever did. Bottom liine is most people would rather take a bad/risky loan and own a home as opposed to renting-but you don't think people should be able to make that decision for themselves.
Mr. Flipper I have no comment on people that flip. My comments were strictly intended for mortgage deductions against ones income. If they were slowly eliminated nothing would change for entry and moderate house buyers. The market would find its proper place. Then if people wanted to buy showcases fine but then I am not subsidizing their actions
Mecken- it has been so long since I have had a mortagage payment I dont remember how much relief I receieved. Rather than upgrade to a larger house or use the equity to invest or buy toys I lived my belief and paid it off as fast as possible. End of story.
that doesn't deal with CGT fred, whih was what I was discussing.
i barely have any idea what anyone is talking about. i just know that someone that makes $500,000 on a house should have to pay taxes on that money. i don't know what rate is fair, but nothing? that is ridiculous.
Please see the above scenarios
Fred do youmutiiz any tax shelters?
shuold read utilize above
I agree with fred.
the general concept of our system rewards debt (with tax breaks). it is a bad way to live and is going to lead (or already is) leading to serious problems, not just for individuals, but for the society as a whole.
Chuck - I agree that any tax incentives in this situation should be less focused on debt and mroe on rewarding saving - which fortunately is finally starting to happen, especially if a person is nearing retirement age.
The limits on the housing rules are all screwe up because of places like where I live where buying a 1 bedroom apartment would cost roughly $700,000-$800,000.
so we have a dysfunctional tax code?!?!?!?!?!? Shocking
anonymous,
Nope no shelters
In the past I paid some serious $$ in taxes.
The way I looked at it was 3-fold
1. If I was paying large amount of taxes then I must be making a good income.
2. Although a large % of my tax money wasted at least some was going to people less fortunate
3. I was a small price to pay for having been lucky enough to have been born an American
at least you live the courage of your convictions
"I was a small price to pay for having been lucky enough to have been born an American"
I was lucky enough to be born an American and pass for white.
Mencken,
Thanks for pointing out that I am white. I have admitted that I was born with advantages in past posts. But if it makes you feel better I will state it one more time. Mencken unlike you who has every reason to constantly complain about everything because of your life long oppressed victim status ,I was born with a silver spoon. Does that make you feel better?
Mike D, good point. To my knowledge, property taxes don't take into account cost of living in cities. It seems that many taxes punish those who live in high cost of living cities disproportionately.
The funniest thing is that property taxes in New York are pennies on the dollar.I would assume it is because they generate so much sales tax that they do not need the property taxes. I just saw some $500k properties and it was like $10 per month. That is insanely low compared to Ohio, and I would assume we are much lower than Cali and the fast growing areas.
Fred, my comment had little to do with your being white. Everyone on this blog is white as far as I know. My point was how meaningless your comment was that you were lucky to be born an American. It's like saying how lucky you were to be born a man or a Catholic, or a guy named Fred. What's your point?
Smitty, my friend Ian was telling me about the income tax rates in NYC. Sales and income taxes seem to unbelievably high there.
Kyle,
That would also explain a lot. I guess it is a bigger disadvantage because you can not deduct the sales/income tax as opposed to the real estate taxes.
SmittyPop-
You do get the opportunity to deduct the larger of either (1) the state sales tax paid during a year, or (2) your state income taxes paid in a year, so it is kind of just a wash when trying to trade off high property tax vs. high state sales and income taxes, depending on whether or not those are really proportional.
I am a mexicna gringo
You can deduct your sales tax paid?? So would you have to have like every single receipt?? How does that work??
It is really big pain - essentially yes, you would have to keep nearly every receipt. Most people who end up opting to deduct sales tax vs state income tax do so because they made some major purhcases in the year - like a car or mulitple cars, a boat, several major appliances, etc. - and only use the sales tax paid on those major items in the computation since that is all they really feel like providing documentation for.
This is not something too many people do to my knowledge, but it is an available option.
house flipper, what kind of person would blame the consumer for getting duped into a high-rate interest loan? I blame the banks for having a policy of targeting low-income, high-risk people and telling them they can live the American dream by owning a home that they can't really afford. You were talking about how the banks are nice enough to have this "general rule of thumb for mortgages to people with average/decent credit is 4x their annual salary-provided they aren't already a credit risk." Not true. I don't blame the borrowers. It's the banks who target people that I find fault with.
"general rule of thumb for mortgages to people with average/decent credit is 4x their annual salary-provided they aren't already a credit risk. Not true. "
Uh yes it is true Terra. Here are the three variables that alter that amount. As I said IT WAS A RULE OF THUMB
your monthly income (before taxes);
long-term debts;
cash you can accumulate for a down payment and closing costs.
"house flipper, what kind of person would blame the consumer for getting duped into a high-rate interest loan?"
I didn't state an opinion on that, do you think I approve a buyer's loan? I am interested to know if you are a homeowner and how you paid for your first house? You seem willing to condemn any and all non-traditional approaches so only loan repayment plans that pass the strict "Terra test" can be used. Are you a real estate expert, are you a mortgage broker, Are you a lender? You seem to think of yourself as an expert so tell me what should be the qualifications for getting a home loan?
Again I am not a lender, nor do I have any idea how people get the money to purchase a home. If they are preapproved to a certain amount what type of loan they have is THEIR business (not the sellers!!!! who is what this post was originally about). I don't think grown adults appreciate your nanny-like attitude on what is and is not good for them, especially because I suspect you lack any real knowledge of the subject on which you espouse, but I digress. The original topic was the capital gains exemption as discussed earlier, I have said my piece and provided adequate support for my stance, and no one has bothered to debate my position or denounce the author's baseless depiction of it as some sort of loophole for the ultra rich.
House flipper I LOVE IT.
A simultaneously logical and passionate response.
Terra, c'mon, how can you not place any blame on financially irresponsible individuals, and all the blame on the lender. The fact that so many borrowers cannot pay back these loans justifies the huge interests rates.
Either you force banks to lose money on these borrowers, or you force these individuals to go without a loan.... But Terra, why should that choice be up to you or I??
Post a Comment
<< Home