What You Might Lose with Tax Reform

With the "blank slate" effort to re-write the tax code, certain deductions that the "average" tax payer use regularly are possible casualties.

Without knowing the details of the plan until it becomes public, it is hard to know if the new simple rates structure under discussion would equalize the lost of these deductions for the average person.

Only time will tell.    

WHAT’S IN IT FOR ME?

Topic Summary: What Homeowners May Be Faced With Loosing or Having Reduced  Since 1913, Homeowners have been given preferential treatment. For 100 years, interest on the mortgage has been a favored tax break. It is also one of the costliest tax breaks. It is under fire to be eliminated over time or at least reduced in value. Here is a quick list of some popular tax breaks we homeowners enjoy. 1. Mortgage Interest Interest that you pay on your mortgage is tax deductible, within certain limits. Married taxpayers can deduct all your interest payments on up to  $1 million in mortgage debt secured by a first or second home. The average homeowner using this deduction reduces their taxable income by about $12,000. Americans save around $80 million every year by deducting mortgage interest on their tax returns. 2. Capital Gains Exclusion Married taxpayers who file jointly now get to keep, tax free, up to $500,000 in profit on the sale of a home used as a principal residence for two of the prior five years. 3. Home Equity Loan Interest.  If you borrow money against your home you can deduct the interest paid (within certain limits) 4. Property Taxes. Homeowners at certain levels of income can deduct from their taxable income, local property taxes paid on their home. 5. Energy Efficiency Upgrades/Repairs Deduction Homeowners can deduct the cost of the building materials used for energy efficiency upgrades to their home. This is actually a tax credit, one which is applied as a direct reduction of how much tax you owe, not just a reduction in your taxable income. 6. Loan Forgiveness Deduction: For homeowners who had a mortgage work out or short sale, Congress added in some breaks in 2007. Up to that point the money you saved form the work-out was considered income and taxable. The Debt Forgiveness Act temporarily relieved the taxpayer of that burden. The provision is still active. Source: Al Clark's Home Action

Tax Reform --- Call to Action

Have thoughts on the Tax Code in the USA???

It appears the Senate Tax Writers are starting from scratch. Using a blank slate, "The intent is to lower tax rates that in turn will stimulate the economy".

Call me a pessimist but I have heard that before!

SPECIAL EDITION: CALL FOR ACTION… TELL THEM HOW YOU FEEL! Credit to Al Clark...for this article!!

Topic Summary: Tax Reform Engaging Congressional LeadersTax Reform is underway on Capitol Hill. The Senate tax-writers have adopted a "Blank Slate" approach that initially eliminates every provision in the tax code, including those that are cherished by homeowners and future homeowners.  The intent is to lower tax rates that in turn will stimulate the economy. From a website created for the effort:  "In order to make sure that we end up with a simpler, more efficient and fairer tax code, we believe it is important to start with a "blank slate" -- that is, a tax code without all of the special provisions in the form of exclusions, deductions and credits and other preferences that some refer to as "tax expenditures." This blank slate is not, of course, the end product, nor the end of the discussion.... We plan to operate from an assumption that all special provisions are out unless there is clear evidence that they: (1) help grow the economy, (2) make the tax code fairer, or (3) effectively promote other important policy objectives." The Democratic and Republican leaders of the Senate Finance Committee recently began a legislative push to simplify the tax code by asking all Senators to make a case for including special tax breaks. Senator Max Baucus, on the left, and Senator Orrin Hatch want to start work on the tax code by clearing it of special breaks, unless those breaks meet specific goals.  In the House, the committee that works on tax measures is called the Ways and Means Committee and it is headed up by Dave Camp, (R-Mich). This Committee hasheld many hearings on tax reform and has built "working groups" to arrive at a game plan for tax reform Normally Senators are tasked with the need to eliminate tax breaks but Senator Baucus and Senator Hatch thought that it is easier for Senators to come up with their list of deductions and breaks they want SAVED. Every  $2 trillion in individual tax breaks added back to their "blank slate" would raise tax rates 1.3 to 2.2 percentage points. In other words, Senators must decide between popular tax breaks and low income tax rates. It's easy to see how all consumers could benefit from comprehensive tax reform.

Advantage Buying a Home Versus Renting

Why are you on the sidelines???

 

 

 

     It can't be because you want to

               lose money every month.

 

 

 

    So why aren't you looking to buy

 

        to stop paying rent???





 

Real Estate Market Rolls

Impressive...that is all I can say.

Jim Belote recaps information that I, and perhaps you have seen, from various news outlets in the past week or so. 

A quick read to know that Mortgage Deduction is safe as well as the relief given to home owners going through a short sale or foreclosure.  As Jim notes, this will keep the market improving by removing a costly tax burden to people in these tough situations.

You have to like the news on Phoenix and Las Vegas as well as national 5%+ home value increase.  Yet, note the continued warning on interest rate pressures.  This is bound to be a topic of many reports in the next few months.

Keeping you updated on the market! For the week of  January 7, 2012 MARKET RECAP It appears Congress and the president have finally reached a compromise on the “fiscal cliff” – the agglomeration of tax increases and spending cuts that were set to take effect in January 2013. The good news is the housing and mortgage markets survived unscathed. The Mortgage Forgiveness Debt Relief Act remains in force for another year. This means forgiven mortgage debt will remain untaxed. Without this extension, short sales, foreclosures, and loan modifications would have become encumbered with a tax burden. This would have been a serious blow to the recovery. These basic market-clearing mechanisms were vital to the housing recovery in 2012, and will continue to help the recovery along in 2013. The mortgage interest deduction also remains intact, which means mortgage financing remains a very good low-cost deal. It also means mortgage financing remains a savvy leveraging strategy for purchasing an asset (residential real estate) that is rising in value; thus providing a means to increase returns on invested capital. In other words, the housing recovery is here to stay, and the latest round of price data supports this conclusion. Trulia reports that asking-price gains accelerated throughout the past year. In the first quarter of 2012, national home prices increased 0.8% quarter over quarter; by the fourth quarter, the pace had increased to 2.3%. Year over year, national home prices were up 5.1%. Fueling the home-price acceleration was the former left-for-dead Phoenix market, which staged a remarkable resurrection that continues to this day. Home prices in Phoenix were up 25% for the year. We've frequently written that falling prices will eventually produce more buyer interest, which, in turn, will lead to an eventual recovery. Phoenix is proof this economic maxim works. Las Vegas also proves the maxim. It seems like it has taken an eternity, but the Las Vegas housing market is on the mend. Home prices in Las Vegas were up 10% year over year in December, building on a price-recovery trend that begin in the second half of 2012. We noted early in 2012 that a recovery in the Las Vegas housing market would likely mean the recovery had become a country-wide phenomenon. This appears the case today. Home prices around the country remain on the rise, and it's appearing more likely that mortgage rates will be rising too. Over the past couple weeks, rates have been inching higher. What's more, events in the debt market point to even higher rates. We are speaking specifically of the 10-year U.S. Treasury note – a benchmark for the mortgage-backed security market and the 30-year fixed-rate mortgage. The yield on the 10-year Treasury has moved considerably higher over the past month. In fact, the yield on the 10-year Treasury today is approaching its highest point in nearly four months. The trend in the 10-year Treasury yield is worth following, because if the job market and economy continue to improve (as we expect), then you can be sure that the yield on the 10-year Treasury note will continue to rise. Should this occur, mortgage lending rates are sure to follow.   Economic  Indicator Release  Date and Time Consensus  Estimate Analysis Consumer Credit (November) Tues., Jan. 8, 3:00 pm, ET $15 Billion (Increase) Important. Rising credit use reflects rising consumer confidence. Mortgage Applications Wed., Jan. 9, 7:00 am, ET None Important. Applications are expected to regain pace after the holiday-season lull. International Trade (November) Fri., Jan 11, 8:30 am, ET $40.2 Billion (Deficit) Moderately Important. Lower energy prices are reducing the current account deficit. Import Prices (December) Fri., Jan 11, 8:30 am, ET No Change Important Prices. Import prices continue to help hold inflation in check.   No Such Thing as a Perfect Market   No sooner had news on the “fiscal cliff” reached the market when frets and worries turned to the debt ceiling. The federal government hit its legal borrowing limit of $16.4 trillion this past week. Now pundits and professional worriers are fretting over what implications this impasse will have on financial markets and the economy. No need to fret or worry, because perfection is impossible. Markets will always be encumbered with uncertainty. To wait for perfection is to wait in perpetuity and to never act. In fact, the best time to act is when the outlook appears most dire and sentiment is decidedly negative. That's when the best values appear. We saw that in the residential real estate market in 2011 and early 2012. Many people who bought a home then are already sitting on a tidy gain today. We still see value, just not as much of it. Low mortgage lending rates have been an extenuating factor, but we believe if borrowers (and refinanciers) wait much longer the value of that factor will fall should rates rise. The point we can't emphasis enough is not to wait for perfection, because perfection doesn't (and never will) exist.     If you wish to unsubscribe, click on the link below and send the email. If this message was forwarded to you, please reply to the sender. Click Here To Unsubscribe EQUAL HOUSING LENDER

WHERE IS THE MORTGAGE INTEREST DEDUCTION IN FISCAL CLIFF TALKS?

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? WHERE IS THE MORTGAGE INTEREST DEDUCTION IN ALL OF THIS?

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.

Whttp://www.usatoday.com/story/news/politics/2012/12/04/fiscal-cliff-mortgage-deduction/1737611/Tell Bryan Cerny What You Think

Fiscal Cliff: Mortgage Deduction On Way Out???

Ever since Mitt Romey made note in August about the possiblity of the Mortgage Deduction being reduced, the Mortgage Deduction has come a focus of the "tax revenure enhancement" forces in Congress.

With the Fiscal Cliff rapidly approaching(less than 45 days!!), House Republicans and President Obama will be looking for a means to avoid going over the cliff.  As is the wonk of political compromise, unseen consequences arise for the expediency required to avoid a crisis.  And the the Fiscal Cliff is a CRISIS!!

Thus, you need to be aware that the Mortgage Deduction will come under attack as will many others like Oil Subsidies and like "Corporate Welfare" deductions/loopholes.   The basis of the attack will to raise tax revenues without "raising tax rates"....kind of like a bank giving free checking with lots of fees for checks, copies of checks and like...significant cost impact hidden by words like "Free" or "No tax increase" pledges.

You and I may debate for hours if this is the right way or the wrong way to increase federal revenues.  Yet, the fact remains the fact.   Fiddling with the Mortgage Deduction, at minimum,  will:

    1. Directly impact the finacial feasibility of home ownership,
    2. Remove the incentive to buy a home
    3. Reduce home values by up to 25%
    4. Cause more homeowners to go under water on their mortgage
    5.  Reduce home affordability for low income, first time home owners and other buyers with
            low reserves.

IF you believe as I do, that the Mortgage Deduction is a value added feature of our tax code, contact your Congress man/woman, Senator, and the President's office.  Let them know where you stand.

 Perhaps as Congressman Forbe did, your representatives will send a email survey to get your take on this matter.