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Opinion Editorials

The outrageous flaws of repealing the mortgage interest deduction

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Aerial view of a Pennsylvania neighborhood, original photo by daveynin.

100 year old tax deduction in danger

Every few months it seems as though the Mortgage Interest Deduction makes headlines as those readers of AG, and us in the real estate industry surely know.  With the budget crisis that was narrowly resolved in DC at the start of this month, again MID appears to be making another comeback.  NAR, the NAHB, who also has a site dedicated to protecting MID, called Save My MID, and other pro-homeowner groups will be lobbying for no changes to this sacred cow, this housing subsidy, that some call MID, which has been around for nearly 100 years.  Other groups will be advocating for lowering the max amount that MID can be applied to, nixing second homes, or perhaps, eliminating it altogether.

Most of us, as Realtors, do not moonlight as accountants, nor do we make a habit of studying tax policy. And some of us, (me) are really pretty bad at the whole numbers thing, anyway. It becomes extremely helpful when others are able to put figures into tables or charts. The Reason Foundation released a four page summary this month on why MID should be completely bounced from the tax code. While they are advocating for the repeal of the mortgage interest deduction, their summary is still very good. 

The New York Times recently published an article regarding MID too, showing a breakdown of who claims this deduction, as well as how people do support it, while saying it primarily benefits the wealthy, and younger homeowners. Both are informative, even if one is rallying against MID, as they use hard numbers from the IRS backing up their information.

Reacting to studies on the Mortgage Interest Deduction

A couple of their conclusions are complete Duh Moments, however. They say that younger and wealthier owners benefit the most.  Obviously younger owners are going to have more interest to deduct over a longer time than someone who has nearly paid off their mortgage, and owes mostly principal. Duh. 

What both articles classify as wealthy, is actually an irritating Duh Moment. Apparently filers who earn $75,000 or more are year are now “wealthy.” Uh, really? Me, and just about everyone I know are now rich? I had no idea! I could have sworn most of us live in middle-class houses, drive middle-class vehicles, and save up for middle-class vacations. 

Silly writers, why do you think we take advantage of the MID? If we’re are not out making major business related purchases every year, or do not have dependants, what other deductions do we have? *cough*  MID and property taxes. Imagine that, both are related to homeownership.

Looking beyond income brackets

Instead of looking at just income brackets, and who itemizes, as the articles above point out, have we ever thought about who may claim MID? Instead of wondering, I asked a longtime friend, who happens to be an accountant who said that wealthy tax filiers are going to have many more deductions overall, and probably benefit the most, true. But how our tax code is written, it allows pretty much everyone to claim the MID, if they are a homeowner. It does phase out part of the AMT, but most are entitled to claim it, no matter how they file, it just goes in different places on tax forms.

This is absolutely a simplified version of what Brett Thomas, my awesome accountant friend, shared, but it really puts into perspective that everyone who owns a home can benefit from the mortgage interest deduction. It is not just the mega rich, or those who are truly itemizing (think Schedule C) their taxes every year.

MID’s role in the rent vs. buy debate

The common claims, that MID allows owners to afford to buy more home than they otherwise could, or that values would decline and purchases to slow if MID were eliminated, may or may not be true.  I’m not smart enough to know that, and I don’t have a crystal ball in my bag of tricks. 

I do know, for a fact that MID was one of the main reasons I chose to buy, and way before my real estate career began. At the time, the price of renting was very similar to a mortgage payment, I’d be able to paint walls, hang pictures, would no longer have to haul my laundry elsewhere to be washed, and other awesome things, all without worrying about losing a security deposit. 

Most importantly, I’d be able to offset some of the marriage penalty I got smacked with and possibly not end up owing so darn much every year. Hey, it was buy a house or get a divorce, and lawyers are expensive, on a, ahem, middle-class income.

Katie Cosner, occasionally known as Kathleen, or KT, is a Realtor® with Cutler Real Estate and is active in her local Board of Realtors® on the Equal Opportunity & Professional Development Committee. She has been floating around online for a number of years, and is on facebook as well as twitter. While Katie has a few hardcore beliefs, three in the Real Estate World to live and die by are; education, ethics, and the law - insert random quote from “A Few Good Men” here. Katie is also an avid Cleveland Indians fan, which really explains quite a bit of her… quirks.

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24 Comments

24 Comments

  1. Joe Loomer

    August 10, 2011 at 6:06 am

    A large portion of the "young" filers don't even use their MID because they do not make enough or are not in a position to itemize. Pretty much every enlisted active duty military (below the rank of E8) falls in that category.

    Navy Chief, Navy Pride

    • Kathleen Cosner

      August 10, 2011 at 6:39 am

      Joe, it's not nec about itemizing, per se, like the self employed (us agents, for example, who use a Sched C) will do. There's a place on the 1040 for certain deductions, like property taxes and MID, but it may offset some by the AMT deduction. But it is still "claimable" (is that a word?) by people who don't "truly itemize" as we have come to think of it. Again, this is a super simplified explanation of how it works.

  2. Bruce Lemieux

    August 10, 2011 at 8:29 am

    Everyone wants a simpler and fairer tax code. Yet every deduction and loophole has a constituency ready to fight for its preservation — like the MID.

    The government does lots of things to encourage specific economic behavior which has resulted in a horrifically complex and unmanageable tax code. For me – as a home owner and real estate agent – I would be happy to see the MID go away *if* it accompanied a simplified federal tax at a lower rate.

    • Kathleen Cosner

      August 10, 2011 at 10:12 am

      Bruce, while I sort of agree, our tax code is insanely complex, and some things are rewarded, completely rewriting it and doing away with most deductions probably would take several lifetimes – we didn't get here overnight, afterall.

  3. Mark Jacobs

    August 25, 2011 at 8:40 am

    We don't need to rewrite just make it simpler

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Opinion Editorials

Your business model doesn’t have to be a unicorn or a camel to succeed

(OPINION / EDITORIAL) It’s not unusual for people to suggest a new business model analogy, but this latest “camel” suggestion isn’t new or helpful.

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Camels walking in desert, not the best business model.

This year in 2020 I’ve seen a great deal of unique takes on how our system works. From 45 all the way down to children instructing adults on how to wear masks properly. However, after reading this new article published by the Harvard Business Review, I don’t think I’ve ever seen something so out of touch with the rest of the business world. Here’s a brief synopsis on this article on business model.

The author has decided that now of all times it’s drastically important for startups and entrepreneurs to switch their business tactics. Changing from a heavy front-end investment or “startups worth over a billion dollars” colloquially called “Unicorns” to a more financially reserved business model. One he has tried to coin as the “Camel”, using references to the animal’s ability to survive “long periods of time without sustenance, withstand the scorching desert heat, and adapt to extreme variations in climate.”

The author then goes on to outline best practices for this new business plan: “Balance instead of burn”, “Camels are built for the long haul”, “Breadth and depth for resilience”.

Now I will admit that he’s not wrong on his take. It’s a well thought-out adjustment to a very short-term solution. You want to know why I’m sure of that? Because people figured this out decades ago.

The only place that a “Unicorn” system worked was in something like the Silicon Valley software companies. Where people can start with their billions of dollars and expect “blitzscaling” (a rapid building-up tactic) to actually succeed. The rest of the world knows that a slow and resilient pace is better suited for long term investments and growth. This ‘new’ business realization is almost as outdated as the 2000 Olympics.

The other reason I’m not thrilled with this analogy is that they’ve chosen an animal that doesn’t really work well. Camels are temperamental creatures that actually need a great deal of sustenance to survive those conditions they’ve mentioned. It’s water that they don’t need for long periods, once they stock up. They have to have many other resources up front to survive those harsh conditions the article writer mentioned. So by this analogy, it’s not that different than Silicon Valley’s strongly backed “startups.”

If he wanted to actually use the correct animal for this analogy, then he should call it a tortoise business plan. Actually, any type of reptile or shark would work. It would probably be a better comparison in temperament as well, if we’re talking ‘slow and steady wins the race.’ Whatever you do, consider your angle, and settle in for the long haul.

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Opinion Editorials

10 tips for anyone looking to up their professional game

(OPINION / EDITORIAL) It’s easy to get bogged down by the details, procrastinate, and feel unproductive. Here are a few tips to help you stay on track and crush your professional goals.

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Self-reflection is critical to a growth mindset, which you must have if you want to grow and improve. If you are ready to take your professional game to the next level, here are some stories and tips to help you remain focused on killing your goals.

1. Don’t compare yourself to others. Comparison is the thief of joy, as the quote goes. And, in the workplace it’s bound to make you second guess yourself and your abilities. This story explains when comparison can be useful, when to avoid it, and how to change your focus if it’s sucking the life out of you.

2. Burnout is real and the harder you work, the less productive you are. It’s an inverse relationship. But, there are ways to work smarter and have better life balance. Here are some tips to prioritize your workload and find more ease.

3. Stop procrastinating and start getting sh@t done. The reason we procrastinate may be less about not wanting to do something and more about the emotions underlying the task. Ready to get going and stop hemming and hawing, you got this and here’s the way to push through.

4. Perfection is impossible and if you seek this in your work and life, it’s likely you are very frustrated. Let that desire go and learn to be happy with excellence over perfection.

5. If you think you’re really awesome and seriously deserve more money, more responsibility, more of anything and are ready to drop the knowledge on your supervisor or boss, you may want to check this story out to see if your spinning in the right direction.

6. Technology makes it so easy to get answers so quickly, it’s hard to wait around for things to happen. We like instant gratification. Yet, that is another reason procrastination is a problem for some of us, but every person has a different way/reason for procrastinating. Learn what’s up with that.

7. Making choices can be a challenge for some of us (me included) who worry we are making the wrong choice. If you’ve ever struggled with decision making, you know it can be paralyzing and then you either make no decision or choose the safest option. What we have here is the Ambiguity Effect and it can be a real time suck. Kick ambiguity to the curb.

8. If you are having trouble interacting with colleagues or wondering why you don’t hear back from contacts it could be you are creeping folks out unintentionally (we hope). Here’s how to #belesscreepy.

9. In the social media era building your brand and marketing are critical, yet, if you’re posting to the usual suspects and seeing very little engagement, you’ve got a problem. Wharton Business School even did a study on how to fix the situation and be more shareable.

10. Every time you do a presentation that one co-worker butts in and calls you out. Dang. If you aren’t earning respect on the job, you will be limited in your ability to get to the next level. Respect is critical to any leadership position, as well as to making a difference in any role you may have within an organization, but actions can be misconstrued. There are ways to take what may be negative situations and use them to your advantage, building mutual respect.

You have the tools you need, now get out there, work hard, play hard and make sh*t happen. Oh, and remember, growth requires continual reflection and action, but you got this.

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Opinion Editorials

Why soft skills are even more essential in online era

(OPINION / EDITORIAL) Since many of us aren’t seeing our co-workers in person these days, our soft skills are even more important in the online working space.

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Skype video chat with person writing in notebook. Soft skills are critical online.

When did we start thinking of “soft” as bad? I mean, we’ve got soft serve (excellent), softball (good exercise), fabric soft-ener (another industry I’m enjoying killing as a millennial). And we’ve got soft skills.

Or at least… I hope we do.

The shift to non-optional remote working has been difficult for a lot of us, especially for everyone who forgets to press mute before making sure the kids behave. But it’ll take more than being hot-mic savvy to make it through the foreseeable future. Brush up on these soft skills while we’re waiting on a vaccine, and it’ll make the coming months (years?) much easier.

1. Tone mastery

Do you know the difference between “Hey, Brenda, can we have a 1:1 at 12:30pm to go over the laser-equipped yoga pants presentation details?” and “Brenda, we need to talk…”?

If not, you might not have a great grasp on how to say with your typey-words what you can no longer say with your facial expressions. You don’t need to throw an emoji or exclamation point into every sentence to get your points across, but you do have the power to keep your coworkers’ heart rates in a safe range by explaining what exactly you need from them in your initial messages.

Use that power wisely.

2. Checking in

There’s no water cooler talk if there’s no water cooler, right?

Making and maintaining connections is more important now than ever, natural introversion be damned. You wanna be a star, don’tcha? Keep up relationships with public shoutouts, inquiries, and reaction images, and you’ll keep up morale while maintaining and boosting your potential for growth in the company.

Even if you’re not a small-talk kind of person, just a drop in for updates, meeting minutes, or sharing a relevant article via appropriate chatrooms and DMs can help hone your soft skills.

“Karen, this MLM article reminded me of your anti-Scentsy tangent you forgot we could all hear, maybe send this to your pushy ex-friend.”

“Hey, Ravindra, how’s the new laptop working out? All good? No ‘Kill all Humans’ protocols like the last one?”

Simple blips like this can add up like couch change. If you’re an admin, make a general chats section, and work in enough time in meetings to allow everyone to have a bit of a chat before getting down to business.

3. Make yourself available

This was important before the pandemic, honestly, but it bears repeating now, especially for everyone in a leadership position. If you’re not making time for check-ins, constantly cancelling meetings, or just generally enjoying being gone when people need you…figure out a way to not. Delegate what you can, bring on a VA, shorten that vacation, whatever you have to do. Everyone’s struggling, and being captain means your crew is looking to you. Don’t let the general air of desperation lull you into thinking a metaphorical keelhauling is out of the question—that extra power still comes with extra responsibility.

Keep yourself from double-bookings, cancellations, and absences as much as possible, and things will continue to improve internally… Even if they don’t in the outside world.

Aesop had a fable about an oak tree and a little river reed. When a storm came, the hardened oak tree fell and died, while the flexible reed bent with the wind and lived. We’re in the storm now, and everyone’s doing their best not to break. Keep yourself rooted friends, but the moral here is to soften up.

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