Mortgage Interest Deduction | proposed changes
Home Mortgage Interest Deduction -
Wikipedia defines it this way – A home mortgage interest deduction allows taxpayers who own their homes to reduce their taxable income by the interest paid on the loan which is secured by their principal residence.
Let me ask you a question and please answer as honestly as you can.
Would you swim in a pool of hungry sharks? Would you stand in front of a charging bull? Would you jump from a bridge into shallow water? Would you play chicken with a freight train headed directly at you? You must be thinking these are trick questions huh? Follow along please….
Hypothetical here –> Let’s say the President put you in charge of ending the housing crisis. Would you eliminate the mortgage interest deduction allowed by the IRS since 1894?
Now that is a crazy thought isn’t it? Who in their right mind would want to eliminate the biggest deduction come tax time for millions of American Homeowners. Not to mention the effect it would have on a fragile housing sector where many experts predict foreclosures to rise, where property values continue to decline and strategic defaulters are no longer stereotyped. Come now, who in the world would consider eliminating the mortgage interest deduction?
Proposals from a White House commission to dramatically slash the federal budget deficit include ELIMINATING MORTGAGE INTEREST DEDUCTION. And to make matters worse, other cost cutting recommendations include Cuts in Social Security Benefits and Defense Spending.
The mortgage interest deduction is the largest tax break for millions of American Homeowners, reducing their tax bill by hundred or even thousands of dollars. And how do you think the housing market is taking this? The National Association of Realtors claims “the Mortgage Interest Deduction (MID) is vital to the stability of the American housing market and economy”. To read the full press release from the NAR – click here. Bob Toll, Chairman of the National Association of Home Builders, calls the proposal “selfish“. Toll also thinks the odds of the proposal getting passed are “zero to negative five”. NAHB has launched a website which they say separates the myths about the MID from reality.
As a Mortgage Banker in Maryland, a State where property values in many parts of the state have taken a big hit, I believe eliminating this tax deduction to be similar as standing in front of a charging freight train. I realize recent statistics point to upward ticks in the economy but let me tell you something. Take it from someone who pulls credit, looks at income and has their finger on the pulse of home values every single day. If the housing market is getting any better, (I don’t really see it nor believe it), the overall health of housing values could be categorized as “fragile” at best.
The engine that drove home sales not too long ago, the housing Tax Credit for New Homebuyers, seems to be a complete 180 degree turn around from the proposed MID. I can understand why NAR and NAHB are up in arms regarding eliminating the Mortgage Interest Deduction.
Share your thoughts about the proposal and let us know how a change would effect you.