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Home » Business And Finance Articles » Tax Reform Limit Of Mortgage Tax Deduction

Tax Reform – Limit of Mortgage Tax Deduction

A committee appointed by President Bush has come up with an alarming recommendation. They want to limit the tax deduction for mortgage interest!

Reform

Following his re-election, President Bush set up an aggressive agenda in which he hoped to reform social security and the tax code amongst other things. As with many things in the political world, this sounded easier done than it really was. With social security, political forces have forced the President to pull back from private accounts. With tax reform, a similar political and practical mistake is being made.

Limited Deduction

The bipartisan tax reform committee appointed by President Bush is making a mess of things. They are proposing the elimination of the Alternative Minimum Tax, which is clearly a good thing. Unfortunately, they are also proposing a limit on the tax deduction you can take for mortgage interests.

Although the final recommendations are not yet published, leaks have led to the belief the tax reform committee is going to propose the mortgage interest tax deduction be limited to the percentage of any loan that the Federal Housing Administration would write. Put another way, you would only be able to write-off interest on the first $315,000 of a mortgage! On top of this disaster, the committee is proposing to eliminate the deduction for property taxes.

Economic Disaster?

The implementation of the above recommendations would be an economic disaster for the United States. The real estate industry would suffer incredibly and the real estate boom would become a bust. In many parts of the country, a single family home averages well over $315,000. In San Diego, the average cost of a home is in the $600,000 range. To get into such homes, many families apply for interest only loans to make ends meet. If they lose half of the interest deduction, default will not be far behind.

Once again, we are faced with a situation where politicians just don't get it. Our housing market is incredibly strong and they want to throw a wrench in the process. Developers and homeowner associations have vowed to fight this "tax reform". You should as well if losing half of your deduction troubles you.

And here is another random article you might be interested in...

The Big Picture: 5 Questions that Can Boost your Business

As business managers, entrepreneurs, and Webmasters, we strive for unobtainable perfection. Why do I say unobtainable? Because when we focus on perfection in one area, we forego attention elsewhere. Limited money and time mean you must choose from the endless parade of advice and recommendations. This creates a dilemma. How do you choose which to embrace and which to pass up?

Consultants, specialists, and/or other departments within your company will eagerly give advice from their viewpoints. You will hear the benefits of focusing on "___" (Fill in the blank with appropriate specialty.). This is not a bad thing; it is their job to sell you on the advantages of their specialties. It is *your* job to probe for the downsides and tradeoffs.

Different Perspectives

Back in my brand management days, it was sometimes frustrating when individual departments could not grasp The Big Picture. The graphics department and the outside ad agency wanted to get artsy when artsy wasn't the best strategy. Manufacturing was only worried about throughput and efficiency - never mind what the customer wanted. Each department was doing what it could to optimize its own function, but this did not always work in The Big Picture.

If all functions were "optimized", it could be to the detriment of the project. When resources are spread too thin and timelines expand, implementation suffers.

In the virtual world the same Big Picture problems occur. Search Engine Optimization (SEO) firms focus on page optimization and submission. Copywriters tout the best way to write content. PR firms tell you how to send press releases. Marketing gurus sell proven programs. Yes, 95% of the advice makes sense in theory. Toss in a dose of reality, however, and you may have an unmanageable mess.

The Big Picture

When reality hits, you find it is simply impossible to optimize all areas of your business. You cannot grind everything to a halt while you try for detailed perfection. God may be in the details, but profit is in the implementation. As manager or "chief cook and bottle washer", it is your job to bundle the advice into a profitable package and make it work.

Once you accept that some areas are going to be initially less than perfect (Providing you with opportunity over time to improve.), the challenge is to figure out what makes sense for your business and site. When is it critical to optimize and when is less than perfect acceptable?

When considering specialist's advice, ask yourself these five questions:

1) Does it solve a problem?

One of the best ways to comprehend the importance of an action is to relate it to a problem. If you think strategically - first identifying your major problems, then designing solutions to solve those problems - your business is more likely to thrive.

2) What are my alternatives?

There is always more than one solution to a problem. If you evaluate different approaches, you will ultimately make better decisions.

3) What are the downsides?

Perfection and optimization are in the eyes of the beholder. What you see as a disadvantage may seem trivial to the specialists. Ask questions and do some research on your own to uncover the downsides.

4) Is it likely to be profitable *for me*?

It is a cruel fact that larger companies can afford programs that smaller companies and individuals cannot. If you have to go into debt or dramatically reduce other critical activities to implement a program, your cost increases dramatically. In these cases, carefully weigh the resources required against the potential gain.

5) What happens if I do not do this?

Some activities are "niceties" and some are necessities. Know the difference. If you are losing customers to other sites or businesses, for example, taking action is critical. Some activities - those you *want* to do but do not help solve a significant problem - can be pushed to the back burner.

Incorporating The Big Picture into your decision-making is critical. When you ask yourself these five questions, you are in a better position to make the right decision. Your business depends on it.