HT/ JC LAdy
Let’s say you own a home and your mortgage is $1,000 a month. If, however, you instead rented the home from a landlord your rent, let’s say, would be $2,000 a month. To the mandarins at the IRS, you are “earning” an implied $1,000 a month because you own and not rent, and that “value” should be added to your taxable income. If you own your home out-right and don’t have a mortgage at all, you would be “earning” $2,000 a month which the IRS thinks should be added to your taxable income.
I have no doubt there is an elaborate, overly complicated theory for how this makes sense. But elaborate, overly complicated theories are also often silly. I own a car. If I didn’t, I would have to rent one from a rental firm, which would be considerably more expensive. Is the difference between my car payment and hypothetical rental fees something I “earned” which should be added to my taxable income?
Yes it is, say the bureaucrats in Washington.
This, to me, is a sign of how big a challenge we face in reigning in Washington. When the feds consider money I don’t have to pay because of a choice I made as a taxable event, then the leviathan is truly all-consuming.
Oh, and the feds list this exemption as one of the top “loopholes” in the tax code. They estimate that it “costs” the feds over $50 billion a year to not levy this tax. Yes, in Washington, items exempt from taxation are considered “costs” the government bears.