Thursday, February 19, 2009

US housing melt down

I have been thinking about an unintended consequence of the housing meltdown in the US. In the US your interest on your mortgage is tax deductible but your rent is not.

People that are losing their houses may also end up paying a lot more in income taxes. A family of four earning a combined gross of $100 000 and formerly paying $2500 a month in mortgage interest may now have an extra $30 000 of taxable income. This could be a steep increase in costs and further reduce the ability of people to consume the US out of the recession.

I am simply stunned at how badly things are going in the US and so glad that in Canada we had not set up things in the same manner.
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