There are tax loopholes brought about by lobbyists, and then there are loopholes only bureaucrats could dream up. Here is an example of the latter, it’s absolutely absurd.
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.
Read the whole thing. This is so mind boggling I’m at a loss for words.