Today, the GOP in Congress revealed their long anticipated tax plan. The proposal includes limitations on the homeowner mortgage interest deduction. The cast of idiots that made this proposal totally astonishes me!
One news article indicated that interest on loans above $500,000 would no longer be deductible.
Another news article indicated that only the interest on the first $500,000 of a loan would be deductible.
Either way, such proposals are riddled with loopholes so big, even Donald Trump’s ego could fit through!
If interest on loans above $500,000 is no longer deductible, no problem! I will just use two $500,000 loans to get my $1 million mortgage.
If only interest on the first $500,000 of a large loan is deductible, I will create a structured loan such that the bottom $500,000 charges a high rate (perhaps 10%), and the amount above $500,000 charges 0.5%. When the loan is completely paid off, the bank got perhaps the equivalent of 4.5% on $1 million. But I can deduct most of the interest, because nearly all the interest was only charged on the bottom $500,000.
So once again, nobody in Washington is thinking!