Econ 366 Notes (10.15.2008)

Econ 366 Notes (10.15.2008) - Owner-occupancy as...

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Econ 366 Notes (10/15/2008) Taxation of Housing - Real Estate Taxes (Local Government) - Federal Income Taxes (Rental Housing) o Tax based on rents received Owner-occupied Housing - Do not pay income taxes - Correction: Real estate tax payments and mortgage interest payments can be deducted o Mortgage interest payments is income for somebody else, not counted as your own income (because it would be double counting) Comparison of taxes on rental and owner-occupied housing - Different between actual rents and (imputed?) rents (Page 231-232… footnote 5 on Page 232) o Difference comes from 1) different treatment of depreciation, 2) the fact that rental income is not taxed (so income tax does not follow imputed rent) o Opportunity cost of living in own house is lower than opportunity cost in renting the house out (a little lower)
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Unformatted text preview: Owner-occupancy as investment-When buying a house, have to consider 2 things: o Is it better to buy or better to rent? o If you have money, should you put it on your house or someplace else?-“t” years depends on total price of house, amount of mortgage (total mortgage), interest, taxes, and so forth) o If you expect to live in the house > t years, then buy. If you expect to live there < t years, then rent. Two fundamental issues of housing:-Enough housing-Affordable housing-What are the policies that ensure these things? o People are encouraged to invest in real estate projects o Houses built in appropriate locations Second major issue: poverty Third major issue: condition of housing (poverty comes into play)- For example, slums (which are in dismal conditions)...
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