Thursday, December 13, 2012


Mortgage Deduction on Fed Taxes
With a desire to keep you in the loop on the impact of the Financial Cliff' s impact on your pocket book and even your ability to afford a home, I have looked for more information to post here.

Al Clark's Home Action Newsletter had this poignant article on the impact of eliminating or downsizing the Mortgage Interest Deduction.  You will note that it saves lots of money for many families and probably the discussion will cause even more home buyers to take the deduction(amazingly,some were
never told about it...or they would be taking the tax savings!

We can't fault, though, the discussions around eliminating the deduction for those making over $500,000.  But that second home, if not tied to income, would hurt the "average" citizen looking to invest in rental properties for a cash income stream.  I am sure a few of you would hate to have that happen.

Read and let me know if you believe this must be protected. If not a fan of keeping the deduction, why not?


The Fiscal Cliff has one of the most cherished tax breaks for many homeowners "on the table." Since 1933, homeowners have been able to deduct interest paid on their mortgages as well as some other home-related borrowing from their income. 
This longstanding tax break encourages and supports home ownership. For families with middle and below-average incomes, the deduction helps too; this includes 65% of families who claim the mortgage interest deduction earn less than $100,000 per year. In addition, American homeowners already pay 80 percent to 90 percent of U.S. federal income tax. Roughly 40% of all homeowners rely on the deduction. The USA TODAY has published very helpful facts on the issue, state by state.

On The Table
Interest deduction is a very popular issue in every conversation held in Washington concerning the Fiscal Cliff. While no one in authority is calling for outright elimination right now, several options are being offered to deal with the $80-90 billion tax break.

If the tax break was eliminated entirely, it would raise over $98 billion in 2013, according to estimates by the congressional Joint Committee on Taxation. Currently being discussed is a type of limit or cap on how much households can deduct based on their income group.

There are feasible ways to increase tax revenue by aiming at high-income earners. For example, the interest deduction based on owning a second home could be ended. Also, the maximum mortgage debt eligible for the interest rate deduction ? now at $1 million - could be reduced. The most popular amount discussed for a remedy is $500,000.

In its proposed budget, the Obama administration plans to focus on high-income taxpayers,  those earning more than $250,000. The administration wants to cap all deductions at 28 percent for this group.

Currently, a high-earning household deducting $20,000 in interest payments (at a 35% tax rate) would receive $7,000 in tax savings. The Obama budget would cap that rate at 28 percent. In the end, that $20,000 of interest payments would result in a smaller tax break of $5,600. The Treasury Department proposes that over the next 10 years, a 28 percent cap would raise $584 billion.

The Fears
Many housing economists and industry trade groups offer that now is not the time to mess with home ownership incentives. The depressed real estate market is making a steady comeback with home values rising in almost every market. US home prices recorded the biggest jump in 6 years this past October.

The National Association of Realtors is mobilizing its membership with a theme of "Do No Harm To Housing." Their rationale for supporting home ownership incentives can be thoroughly examined with the "Home ownership Q and A" on House Logic

Next Steps- Get Your Views Across Before The Decisions Are Made....Click Act Now!

Right now, there is no legislation specifically dealing with the interest deduction. Legislators want to hear from you on this issue so your feedback as a constituent is invaluable to them. We have set up a unique widget that lets you assert your opinions and (at the same time) view how others feel about the decisions being made, pro or con. 

As the talk heats up in Washington the next few days we will keep you updated with alerts.
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