That is just incorrect. Mortgage interest is deductible, personal debt
interest is not (and has never been).
Second mortgages and other forms of rolling improvements into mortgage
vehicles have been in existence far longer than this for precisely that
Credit card interest was deductible until the 1986 tax reform bill.
Check it out at various sites, for example:
"On Oct. 22, 1986, President Ronald Reagan signed into law the Tax
Reform Act of 1986. Reagan called the 829-page, 33-pound bill 'the most
sweeping overhaul of the tax code in our nation's history.'
"The new code gradually phased out all deductions for interest paid on
car loans, charge-account purchases, vacations and anything else that
fell under what the law termed 'consumer loans.'
"The sole exception was interest payments on home loans. At the time,
according to Mark Green, a spokesman for the Internal Revenue Service,
Congress believed deductions for personal interest encouraged people to
consume and stifle savings."
Wrong. I have tax returns from the 1980s clearly showing credit card
interest deductions and they must have been legal since there's a place for
the deduction on the preprinted form. You must just be too young to
the bottom line,
for those who arent concerned relax and enjoy the ride but DONT
complain if your hurting too by the time things bottom. perhaps
unemployeed or underemployeed, perhaps you will need to sell your home
for one reason or another and find not only is its value down, but
buyers who are interested cant get a loan.
or so many end up out of work the cost to those still working
skyrockets for socia services to help the unemployeed.
or perhaps what will bug you is that as government pumps money into
our economy, the value of our dollar tanks and foreigners own and
COINTROL the country.
true lack of personal responsiblity for both buyers and lenders caused
the trouble, along with federal regulators ignoring the
but this mess can and likely will hurt each and every one of us.....
stocks can go down just as easily as up..........
well i certinally hope all these relax everything is fine dont worry
things are great are REALLY as wonderful as you believe......
my point about the feds pumping money into the economy is that this
means they believe things arent good.............
and they need to do something about it.......
my concern is that the entire US economy is based on consumption and
the housing and other indicators may be showing a collapse of their
time will tell, but over 10% in mortage default hasnt been seen since
the depression of 1929..........
When you have an ex who pops up every few years claiming that you owe
him money for taxes and other payments from 1978-1989, you never throw
out ANY financial record created during the marriage. No matter what
ridiculous claim he makes, I have the paperwork to prove it's bogus.
Anything from 1990 on, however, gets tossed after seven years.
Wrong. It was many years ago. Credit card companies even gave you a
statement of how much you paid for the year. Car payment interest was
deducible also. I think it was in the late 70's, maybe 1980 that the tax
code was changed to eliminate those deductions.
Make that 20+ -- it has been so long I had actually forgotten it, but it
was the Tax Reform Act of 1986 that repealed it.
The above ascribed motivation is, however, still incorrect --
Deductions & Tax Liability
IMPORTANT MESSAGE: We have compiled the list of questions below based on
inquiries that we receive. This information is generic in nature
regarding tax policy questions and is NOT intended to serve as tax
advice. We also cannot provide up-to-date information on any
Administration or Congressional proposals that may affect the
information shown herein. Any questions regarding specific tax
situations or for help in filling out your tax return should be directed
to your attorney, accountant or other tax professional, or to the
Internal Revenue Service. The IRS will not comment, though, on the
legislative merits of current tax law, or on pending Congressional
action that may change the tax code. Finally, we make every effort to
make certain that the information contained here is accurate, but due to
the fluid nature of the legislative process, changes in tax laws may
occur that are not reflected here at the time of publication. To the
best of our knowledge, this information is accurate.
Question Why can't I deduct "personal" interest expenses when I purchase
a car, or for the interest on my credit cards?
Answer The deduction for personal interest, including interest on charge
card purchase of consumer items, was phased out by the Tax Reform Act of
1986. Congress believed that the deduction for personal interest
encouraged people to consume and that such consumption was at the cost
of savings. At the time, the American savings rate was declining and,
unfortunately, the private savings rates continues to remain low. To
eliminate the significant disincentive to savings, Congress repealed the
itemized deduction for personal interest other than mortgage interest.
So, "greed" played little in the decision; it was an attempt to
influence a more responsible consumer attitude by monetary/taxation policy.
Looking back now, it was a good policy. Credit card interest escalated
to 20% or more under Jimmy Carter.
I remember long gas lines in the 70's, 5 lbs. sugar was nearing $6.00.
I hope Congress will do the right thing and not tax the Internet!
Yes. Bringing it up as if a 20+ yr old policy targeted to the low
savings rates of consumers as if it had any bearing whatsoever on the
current sub-prime mortgage situation was simply ludicrous.
Unfortunately, it had been long enough ago I had actually forgotten it
was ever policy to allow personal interest...
And, of course, high interest rates were not on c-c interest only--CDs
were paying 12% or more.
well the unintended consquence was rolling way too much debt into
homes, thus adding voltality to the market.
most people i know have done this and sadly will never pay off their
homes, unless they live to over a 100
I was taught to buy only what you need when you can afford.
Living by the rule I ended up living comfortably without any debt.
People buy what they want, not need regardless of their ability
to pay for it. Your government is leading the example running into
deep deep deficit.
HomeOwnersHub.com is a website for homeowners and building and maintenance pros. It is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.