Why Not Make Payments to Mortgage Principal Tax Deductible Instead of Mortgage Interest Payments

Former FDIC Chair, Sheila Bair has a thought provoking piece in the March 19th issue of Fortune:  http://finance.fortune.cnn.com/tag/sheila-bair/

In it she proposes a pretty controversial idea.  Why not get rid of the mortgage interest deduction and replace it with a tax break for paying down principal on a mortgage.  This is a very interesting question. What are we really incentivizing with a mortgage interest deduction?

As Bair says, we are incentivizing homeowners to use their homes like a credit card because even interest on second mortages is tax deductible.  As Bair writes, "A dirty little secret of the crisis is that the majority of toxic mortgages were not made to expand home ownership. They were refinancings aggressively marketed as a tax-advantaged way to pull cash out of a house." 


So if we really want to encourage homeownership, give consumers more of a reason to "own" more of their own home by paying down the principal faster instead of giving them a reason to hold on to a mortgage as long as they can.  I've heard people say that they don't want to pay off their mortgage because they would lose the tax break.  Ultimately that seems to benefit banks more than homeowners.  


There are plenty of other tax breaks you can take advantage of including depreciation on a rental property (http://novarealestateinvestor.blogspot.com/2011/06/basics-of-depreciation.html)
I would like to see some economic studies on this idea but benefiting consumers for paying down principal seems like an idea with a lot of merit. 

GMU in talks to Join Atlantic 10 Conference

For all of you local GMU Patriots basketball fans, some interesting news is brewing.  There is a very real possiblity that GMU will leave the Colonial Athletic Association and join the Atlantic 10 Conference in the 2013-14 season.

One of my favorite local bloggers reported the story here:

http://georgemasonbasketball.blogspot.com/2012/03/george-mason-in-discussions-to-join.html

What does that mean for GMU fans?  It means moving to a conference with better teams, bigger budgets, and more TV time.  They would be in the same conference with the likes of Xavier, University of Richmond, St Joe's, and UMass.  It is also rumored that two basketball powerhouses may also be joining the Atlantic 10: VCU and Butler.

GMU would have some stiff competition and less local games in this new Conference but it could be a big draw for recruiting with more opportunities to play before a national audience.

There should be a decision on this in about a month so we will keep you posted.

Fairfax County had the largest influx of new residents in the DC area

According to the latest available statistics, the top destination in the region for new residents is Fairfax County.  Liz Farmer gives the details in her piece today in The Examiner:  http://washingtonexaminer.com/local/maryland/2012/03/fairfax-biggest-draw-regions-newest-residents/417081

In 2009, nearly 88,000 new residents moved to Fairfax County.  That is 20,000 more than the next closest county (Montgomery, 68,000 new residents).  The numbers are fascinating.  Apparently the reason Fairfax is no 1 is its business-friendly climate and excellent public schools.  In fact education was the main reason that Northrup Grumman chose Fairfax over Montgomery county in 2010 for its corporate headquarters.

That type of growth and the foundation of a great educational system means its a great environment to invest in.  All of these new residents need somewhere to live so you might as well take advantage of the high demand for rental housing.

Honey Pig in Centreville: Delicious Korean BBQ

If you are looking for scrumptious, affordable korean bbq then Honey Pig (www.eathoneypig.com) is your place.  This restaurant is the epitome of authentic.  Korean pop blares throughout the restaurant.  The walls are festooned with advertisements and posters in Korean.

Every table has a circular grill in the middle where they cook your favorite meats in front of you and there are a lot of options.  You can choose from pork bellies, octupus, squid, pork rib, pork neck, beef brisket, beef intestine, beef sashimi, flaming hot chicken and others.  The food (especially the pork bellies which are like large pieces of bacon) is delicious.  The grilling makes the meat very tender.  It is also accompanied by a wide variety of cabbages with varying degrees of hot sauce.  If cabbage is your thing then you will really love this place.

The prices can't be beat.  Between $13-$15 for substantial portions.  They are open 24 hours so bring your appetite anytime.

Prepaying Mortgage Interest at the End of a Tax Year Doesn't Bring Immediate Tax Breaks

For all those in the throes of doing their taxes I thought I would pass along a little tip that I learned the hard way.

At the end of 2011, I thought I had come up with a clever way to increase expenses and thus tax deductions in 2011.  I decided to pay my February 2012 mortgage payment on an investment property at the end of 2011 so the costs would go on the 2011 taxes.  Unfortunately, when the bank sent me my tax information it applied the payment to 2012's interest payment.  I thought timing the payment the way I did would give me an immediate tax deduction but that evidently is not allowed.

I guess Einstein was right when he said "The hardest thing in the world to understand is the income tax"

William Carlos Williams Tribute to the Cherry Blossoms

In honor of the cherry blossoms being in full bloom I thought this poem was appropriate:

Cherry Blossoms at Evening by William Carlos Williams

In the prebirth of the evening
the blue cherry blossoms
on the blue tree
from this yellow, ended room --
press to the windows
inside shall be out
the clustered faces of the flowers
straining to look in

Spa World: World Class Korean Spa in Centreville

In the most unassuming of locations, a strip mall with an IHOP near the intersection of Route 29 and Route 28, is an incredible luxury Korean spa called Spa World (www.spaworldusa.com).  What is so special about this place you may ask?  They do offer traditional spa services like body massages and salon services but that is just the tip of the iceberg.  This is a 50,000 square foot facility with large heated "Bade" pools, steam rooms, saunas, jacuzzis, cooling tubs, and 7 "Poultice" rooms that generate radiant heat from natural earth elements such as hot red clay, oak wood, blue onyx, salt, and amethyst.  There is even an ice room!!

People looking for illicit services should look elsewhere.  This is a purely family friendly place.  In fact the rooms with all of the heated pools are segregated by sex.  And for good reason because you can only wear what God gave you into the pools.  (Evidently it is because of the residual detergents in swimming suits that could interfere with the ph balance in the water).

The poultice rooms are co-ed and they give you a short and shirt outfit to wear there.

Here's how it works:  $25 gives you 12 hour access to the Bade pool, steam, sauna, and jacuzzis.  They have delicious healthy food you can purchase and even a room where you can sleep if you want.  For $10 more you get access to the poultice rooms as well.  There are even yearly memberships of $2,000 for those who want to come really regularly.  This place is open 24/7!!

If you ever really need to relax, this is the place to visit.  It is worth every penny.