Owning a Home in U.S. Has Fewer Tax Benefits Than You Think
For The Average Person, The Two Biggest Tax Deductions Are Home Mortgage Interest & The Ira, 401(K)
You may think the government was on the up & up when they created these deductions, but … let me tell you what the real motivation was. Imagine one of those smoke filled back rooms, because that’s where we’re going. The real motivation behind both those deductions was to move massive amounts to the big banks. They worked like a charm.
The home mortgage interest deduction exists solely to drive money and profits to the big banks. It wasn’t created to encourage home ownership, like they tell you. (Hey, it worked.) Before it was passed into law, most people did not own their home. After the deduction was passed into law, people started buying houses to take advantage of the tax deduction. Now most people own their own homes. Big banks make out like bandits because they finance all those homes. They got what they wanted.
The IRA, 401(k) deduction exists solely to drive money and profits to Wall Street. Which ends up in the hands of the big banks. The deduction wasn’t created to help you provide for retirement, like they tell you. Before the IRA deduction, few people owned mutual funds or had money in the stock market. But now almost everyone has money in the stock market because every penny (at least 99%) put into an IRA ends up in a mutual fund on the stock market. They got what they wanted.
None of this is a bad thing. They’re not doing this to screw you. Of course they wouldn’t care if it did screw you, but that’s not the purpose. They did it to make money, pure & simple. The banks got profits and the Senators & Congressmenprobably (don’t sue me) got perks and political contributions.
But here’s the flip side. Once this is done, it’s done. Everyone can take advantage. Congress isn’t any smarter than your next door neighbor, and you know how bright that guy is. Sometimes unintended consequences happen.
Here’s what you need to do. Keep your eye open for this kind of stuff (technical term), or keep advisors like me around who alert you to this stuff (still a technical term). Use these intentional loopholes when they work for you, and avoid them when they don’t. Perhaps there’s an unintended consequence lurking there that can save you a ton of money.
Stranger things have happened.