Equity shaming

[boarder42]

It's not deductible anymore for a majority of of tax payers since they capped salt at 10k and moved the standard deduction to 24k. Prior or salt taxes were 17k and all our mortgage interest was deductible. Now we don't have enough interest to even make donations deductible after 10k plus mortgage interest. It's highly unlikely anyone upper middle and down will get real value out of the deduction like we used to.

Except those of us who are upper middle, towards the beginning of paying our large mortgage (payments are mostly interest) and single (standard deduction is only 12K).  I'm one of the few who will still be itemizing, but will get shafted by not being able to claim all my SALT.

correct previously SALT got you and us above the deduction.  so now not all of your interest is deductible only after the first 7k for single correct? since SALT for you is likely capped at 5k?

Nope, I'll still get 10K SALT deduction as far as I can tell (used the online calculator to determine correct withholding and it capped at 10K not 5K), but my SALT is still higher than that.  The mortgage interest or SALT alone previously put me above the standard deductions. Under the old rules I have between 24-26K in itemized deductions depending on donations.  Now I'll have around 21-22K in deductions.  They also changed the tax brackets such that when I get my next raise I'll be in the 32% bracket, previously I had a lot more room in the 28% bracket.  The truly aggravating part is that the tax laws will expire the year I FIRE, when I will then actually have been able to come out ahead in that aspect.

well thats bull shit thats a marriage tax then.  wonder if MFSeparate may be better now i'm going to look into this.

[Spitfire]

Both sides on MFS have to use the same method (itemized or standard), and the tax brackets shrink for each, so most of the time it doesn't come out better. 

[TomTX]

Both sides on MFS have to use the same method (itemized or standard), and the tax brackets shrink for each, so most of the time it doesn't come out better.

Rules for the taxability of social security income actively encourage getting an actual divorce and living in sin!

[Dicey]

So what interest rate is the breaking point?

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Depends on where you're at in the investment order. And if you still get a tax deduction which is unlikely.  However with the cfiresim I ran even doing 7% cash out refinances improved success rate when done every 10 years with assumed house value appreciation of 3% annually.

While I'm firmly in the camp of holding your mortgage and refinancing to leverage (depending on interest rate) do you think the house value appreciation assumption is a solid one? House appreciation typically tracks income and not inflation.

House appreciation is very location dependent, I'm not sure that you can apply any rule of thumb to it.  While it's possible to make an educated guess about how things will work out, relying on it is always going to be risky.

I agree that anticipating appreciation is risk,, but relying on appreciation that's already occurred is much less so.
Except for the myth of downsizing in retirement. Wherein the new, smaller place costs as much as the existing home. That's often the case in my HCOLA.

[boarder42]

So what interest rate is the breaking point?

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Depends on where you're at in the investment order. And if you still get a tax deduction which is unlikely.  However with the cfiresim I ran even doing 7% cash out refinances improved success rate when done every 10 years with assumed house value appreciation of 3% annually.

While I'm firmly in the camp of holding your mortgage and refinancing to leverage (depending on interest rate) do you think the house value appreciation assumption is a solid one? House appreciation typically tracks income and not inflation.

House appreciation is very location dependent, I'm not sure that you can apply any rule of thumb to it.  While it's possible to make an educated guess about how things will work out, relying on it is always going to be risky.

I agree that anticipating appreciation is risk,, but relying on appreciation that's already occurred is much less so.
Except for the myth of downsizing in retirement. Wherein the new, smaller place costs as much as the existing home. That's often the case in my HCOLA.

there are so many variables outside of house appreciation in that equation including the interest rate that i dont think any one of them matter a whole lot - even our equity returns are estimates.  we have estimates on estimates on estimates in our calcs.  but when you're making the decision you have the actual data you know the rate you know the house appreciation and you can make and educated decision.  all it does is add extra safety to an already safe 4% SWR if the conditions are right why not do it.

[GuitarStv]

So what interest rate is the breaking point?

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Depends on where you're at in the investment order. And if you still get a tax deduction which is unlikely.  However with the cfiresim I ran even doing 7% cash out refinances improved success rate when done every 10 years with assumed house value appreciation of 3% annually.

While I'm firmly in the camp of holding your mortgage and refinancing to leverage (depending on interest rate) do you think the house value appreciation assumption is a solid one? House appreciation typically tracks income and not inflation.

House appreciation is very location dependent, I'm not sure that you can apply any rule of thumb to it.  While it's possible to make an educated guess about how things will work out, relying on it is always going to be risky.

I agree that anticipating appreciation is risk,, but relying on appreciation that's already occurred is much less so.
Except for the myth of downsizing in retirement. Wherein the new, smaller place costs as much as the existing home. That's often the case in my HCOLA.

If you're planning to sell your home in a HCOLA to downsize in retirement, I'd assume that you're also planning to move to a lower cost area.

[robartsd]

Both sides on MFS have to use the same method (itemized or standard), and the tax brackets shrink for each, so most of the time it doesn't come out better.

Rules for the taxability of social security income actively encourage getting an actual divorce and living in sin!

Other than sharing all income equally between spouses (which is a big deal for traditional breadwinner/homemaker families - not so much for DINK couples that have similar incomes); there aren't any tax advantages to marriage that I am aware of (and a few places where taxes/government benefits are negatively impacted by marriage).

[Hargrove]

A single earner making a boatload of money in a married household has his/her taxes reduced by the switch to the "filing jointly" tax and retirement contribution thresholds, which are all higher than the single filer thresholds. That's the most common "marriage benefit" in taxes.

The "marriage penalty" is most commonly when two high-earners marry and realize that the filing-jointly cap is not double the filing-single cap - they pay more in taxes.

[boarder42]

A single earner making a boatload of money in a married household has his/her taxes reduced by the switch to the "filing jointly" tax and retirement contribution thresholds, which are all higher than the single filer thresholds. That's the most common "marriage benefit" in taxes.

The "marriage penalty" is most commonly when two high-earners marry and realize that the filing-jointly cap is not double the filing-single cap - they pay more in taxes.

and apparently our deduction caps aren;t as high as they should be either!  if that was 20k for SALT for MFJ i'd be really raking in on my mortgage interest.  we have around 16k in SALT so the first 4k of my mortgage wouldnt be tax deductible but the rest of the 8k would be. I still come out ahead in the new tax law but this is pretty frustrating.