Interest Mortgage Deduction....Advantage: Home Owner

UPDATE YOUR INFORMATION SAVED ARTICLES REFER  COMMENTS & FEEDBACK YOUR SPONSOR Al Clark 5705103507Send EmailAny Link You Want Any Link 2 Any Link 3 Any Link 4 Any Link 5 Any Link 6 MORTGAGE INTEREST DEDUCTION FRONT AND CENTER IN CONGRESS Topic Summary: As part of the ongoing effort by House lawmakers to craft comprehensive tax reform legislation in 2013, the House Ways and Means Committee welcomed testimony from real estate industry executives and economists on the merits of the mortgage interest deduction (MID). On the "keep things as they are side" caution was advised not to harm the very robust housing recovery by adding new tax policies that will lead to uncertainty for homeowners. Just In: The national median existing-home price for all housing types was$184,300 in March, which is 11.8 percent higher than March 2012. The March increase is the strongest since November 2005 when it rose 12.9 percent from a year earlier, and the last time there were 13 consecutive months of year-over-year price increases was from May 2005 to May 2006. Not if , but how. Many in Washington and real estate circles feel that something will be done to the cherished deduction this year. While pledging a "careful, thoughtful review," House Ways and Means Chairman Dave Camp asked several experts for their ideas on how to alter the MID to raise more revenue for the government. Any changes that come about or even discussed can have a chilling effect on the real estate industry and future homebuyers and sellers. Fist Some Facts: The deduction for mortgage interest has been part of the federal income tax code since its inception in 1913. Despite a century of additions, modifications, deletions and overhauls of the tax code, Congress has left the mortgage interest deduction untouched. Current law allows a homeowner to deduct the interest paid yearly on up to $1 million in total acquisition debt for a principal residence and a second, non-rental home. Homeowners may also deduct the interest on up to $100,000 in home equity debt. According to estimates from the Joint Committee on Taxation, (JCT) the mortgage interest deduction will cost (loss revenue) $75 billion in fiscal year 2015, real property tax deductions will cost $30.4 billion and the exclusion of capital gains on owner-occupied housing will cost $26.0 billion. In 2012, 34 million households, or 22 percent of tax filers, claimed the home mortgage deduction. That cost the federal government $68 billion in forgone revenue, according to estimates from the JCT Less than a quarter of the deduction's benefits, the JCT says, went to households making less than $100,000 in 2012, and the deduction is only available to the roughly one-third of households that itemize. Ideas on The Table There are three ways Congress could play with the home mortgage deduction: the direct way, a "back door" way and a gradual way. The direct way to raise more revenue would be to reduce the amount of the deduction--for example, it could be limited to homes (mortgages) worth $500,000 or less, rather than the current $1 million dollar limit. It could also be eliminated entirely for second homes. The most extreme measure would be to phase out the deduction entirely. Such attacks would be strongly fought by the real estate industry and hopefully homeowners. The Sneaky Way.  Instead of specifically targeting the home mortgage deduction, a cap would be placed on all itemized tax deductions. The Obama Administration has already proposed capping such deductions at 28% for households earning more than $250,000. This would substantially reduce the value of the home mortgage deduction for high income taxpayers. For example, Under the President's proposal, married taxpayers with adjusted gross income greater than $250,000 would normally see a $35.00 benefit for every $100 in itemized deductions but instead they would receive only a $28.00 benefit for every $100 in itemized deductions. The Gradual Way. Some are suggesting just wind down the value of the deduction over several years to lessen the sting on the economy and home prices.  Don't forget other deductions are also being talked about for reduction too. The ability to deduct property taxes cost the government $30 billion last year. A Home seller's ability to exclude capital gains on a home sale reduced revenues about $26 billion. Timeframe: The tax writers indicate they want to get substantive tax reform done this year. We will be keeping a watch out for any news on this important issue facing current and would be homeowners.

More on the Mortgage Deduction

Topic Summary: In the last edition we alerted you that Congress is laying the foundation for comprehensive tax reform. (article is below) Sure to be part of those conversations is the Mortgage Interest Deduction (MID) that millions of homeowners benefit from. In this ongoing series we aim to keep you up to speed on the talks in Washington. We will give you an opportunity to get your views across to your elected officials and generally will be a valuable source of information as tax reform takes over the activity in Washington.

But I Don't Have A Mortgage. Why Should I Care? 

If certain provisions in any new tax reform are counter-productive to a robust housing market, all homeowners will lose out. If you have a paid off mortgage are you still deducting state and local property taxes? They are talking about these too. For many homeowners, property taxes are their largest tax deduction, one that continues even after a mortgage is paid off. Just remember if less people can afford to buy a home, selling yours will be more difficult.

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What To Believe: If you benefit or not from the MID, you should be aware of some of the myths that are floating around that distort the conversation on the merits of the tax provision. Our friends at Houselogic have added their research on 6 MYTHS ON THE MORTAGE INTERST DEDUCTION

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By The Numbers. State By State Usage Of The MID

Recently the Pew Organization added some of their findings to the conversation on Tax Reform. They wanted to find out if the benefits of the MID were evenly distributed throughout the country. In other words, where do you stand in relation to other states? 

The percentage of tax filers deducting mortgage interest in 2010 ranged from a high of nearly 37 percent in Maryland to a low of 15 percent in West Virginia and North Dakota.   The Pew Organization's very comprehensive report  can be downloaded HERE

Mortgage Deduction Still on Congress's Mind

It is still on the table!!!

Thanks to Al Clark we are all aware.

It is hard to believe that Congress's professed effort to support the Middle Class would consider eliminating the Mortgage Interest Deduction.  This deduction is a key factor in home affordability whether one buys a $50,000 house in a small town in a very rural part of the country or buys what amounts to a first time home buyer $300,000 home in San Diego. 

The 18% to 25% deduction on mortgage interest equates to huge savings on annual basis and can simply be the difference between buying and sharing in the American Dream of Home Ownership(like the Congressman considering this item) or still giving the landlord all the tax benefits and profits via the tenant's rent payment.

Don't take me wrong: there is nothing wrong with renting!
Yet, to take away one of the under pinnings that allow home ownership to be affordable is not good macro economics for the U.S. economy or micro economics for the home buyer's budget.

Call your Congressman or Congresswoman!

P.S. Don't miss the notes on almost 14% increase in National Median Home price....good news keeps coming

MORTGAGE INTEREST DEDUCTION FRONT AND CENTER IN CONGRESS

Topic Summary: As part of the ongoing effort by House lawmakers to craft comprehensive tax reform legislation in 2013, the House Ways and Means Committee welcomed testimony from real estate industry executives and economists on the merits of the mortgage interest deduction (MID). On the "keep things as they are side" caution was advised not to harm the very robust housing recovery by adding new tax policies that will lead to uncertainty for homeowners.   Just In: The national median existing-home price for all housing types was$184,300 in March, which is 11.8 percent higher than March 2012. The March increase is the strongest since November 2005 when it rose 12.9 percent from a year earlier, and the last time there were 13 consecutive months of year-over-year price increases was from May 2005 to May 2006. Not if , but how. Many in Washington and real estate circles feel that something will be done to the cherished deduction this year. While pledging a "careful, thoughtful review," House Ways and Means Chairman Dave Camp asked several experts for their ideas on how to alter the MID to raise more revenue for the government. Any changes that come about or even discussed can have a chilling effect on the real estate industry and future homebuyers and sellers. Fist Some Facts: The deduction for mortgage interest has been part of the federal income tax code since its inception in 1913. Despite a century of additions, modifications, deletions and overhauls of the tax code, Congress has left the mortgage interest deduction untouched. Current law allows a homeowner to deduct the interest paid yearly on up to $1 million in total acquisition debt for a principal residence and a second, non-rental home. Homeowners may also deduct the interest on up to $100,000 in home equity debt. According to estimates from the Joint Committee on Taxation, (JCT) the mortgage interest deduction will cost (loss revenue) $75 billion in fiscal year 2015, real property tax deductions will cost $30.4 billion and the exclusion of capital gains on owner-occupied housing will cost $26.0 billion. In 2012, 34 million households, or 22 percent of tax filers, claimed the home mortgage deduction. That cost the federal government $68 billion in forgone revenue, according to estimates from the JCT Less than a quarter of the deduction's benefits, the JCT says, went to households making less than $100,000 in 2012, and the deduction is only available to the roughly one-third of households that itemize. Ideas on The Table There are three ways Congress could play with the home mortgage deduction: the direct way, a "back door" way and a gradual way. The direct way to raise more revenue would be to reduce the amount of the deduction--for example, it could be limited to homes (mortgages) worth $500,000 or less, rather than the current $1 million dollar limit. It could also be eliminated entirely for second homes. The most extreme measure would be to phase out the deduction entirely. Such attacks would be strongly fought by the real estate industry and hopefully homeowners. The Sneaky Way.  Instead of specifically targeting the home mortgage deduction, a cap would be placed on all itemized tax deductions. The Obama Administration has already proposed capping such deductions at 28% for households earning more than $250,000. This would substantially reduce the value of the home mortgage deduction for high income taxpayers. For example, Under the President's proposal, married taxpayers with adjusted gross income greater than $250,000 would normally see a $35.00 benefit for every $100 in itemized deductions but instead they would receive only a $28.00 benefit for every $100 in itemized deductions. The Gradual Way. Some are suggesting just wind down the value of the deduction over several years to lessen the sting on the economy and home prices.  Don't forget other deductions are also being talked about for reduction too. The ability to deduct property taxes cost the government $30 billion last year. A Home seller's ability to exclude capital gains on a home sale reduced revenues about $26 billion. Timeframe: The tax writers indicate they want to get substantive tax reform done this year. We will be keeping a watch out for any news on this important issue facing current and would be homeowners.