We've discussed this here before and I disagree. Unless rents are actually tied to landlords costs, no. And they're not.
Deductibility lowers the cost of business for landlords. As it should. But the connection beween that and rents is not direct.
And, in fact, in many places, rents relationship to home prices are *very* disjointed.
Is it the top rate that matters, or is it more important what most taxpayers (or most homeowners, or most potential homeowners, or ...) pay? Until one goes over $160K in income, Canada's income tax rates and those of the US federal government are rather similar. (To put that number in perspective, the median household income in the US is about $50K/year
Mark Freeland snipped-for-privacy@nyc.rr.com
Yes they are. Are you saying that landlords wouldn't raise rents to make up for the loss of that deduction?
Why should it?
We are talking about tax deductions. Renters pay 100% of those taxes and landlords get to deduct them. Thumper
Why should investors get to deduct interest on their real estate if the rest of us cannot?
Notice that in 2005 the bankruptcy laws were changed so that an individual cannot discharge mortgage debt on their primary residence but can on a second home or investment property. Do you think that someone knew that the bubble was about to burst? They certainly took care of the people wealthy enough to buy a vacation home or investment property. Thumper
For the same reason that businesses can deduct expenses that individuals cannot.
-- Rich Carreiro snipped-for-privacy@rlcarr.com
That's not true.
Read up on the concept of "tax incidence".
Depending on how tight the rental market in an area is the tax can fall entirely on the landlord, entirely on the tenant, or anything in between.
If a market is very slack the tax goes up, the LL may well have to eat the whole increase. If the market's very tight, it's a good bet the LL will be able to pass it all through to the tenant, and so on.
-- Rich Carreiro snipped-for-privacy@rlcarr.com
Landlords get to deduct the interest payments from their income, which
*includes rental income*.If the homeowners had to count as income the rent they are imputed to pay themselves, then the mortgage deduction would be more on par with renting. But as it is, they get to deduct the interest without having to declare the income. That is not on par.
Xho
Any landlord that doesn't have at least 100% of all expenses INCLUDING taxes paid by his renters should get out of the business immediately. Thumper
at what should be true, or what is the most fair and just. The idea is that the government allows tax deductions in order to encourage ventures that have a promise of becoming successful at a later date. The hope is that those enterprises thus will generate larger amounts of tax revenue in the future.
Applied to real estate, the idea is that a deduction for business expenses will mean less tax paid now but more tax paid in the future. On the other hand, most homeowners' personal residences will not generate income in the future, so an ordinary home mortgage, upkeep, etc. are not considered business expenses.
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