The Mortgage Interest Deduction has been a part of American Income Tax system since 1913 – this year we celebrate 100 years of benefiting the American Dream of Home Ownership. It is one of the deductions currently on the chopping block. What would happen to the average home owner in the local marketplace for this deduction to be eliminated from tax code? I believe as do many others that it would have an immediate and significant impact on home values.
The mortgage interest tax deduction matters! Currently the mortgage interest deduction is allowable for up to $1 million for a primary loan and $100,000 for a HELOC (Home Equity Line of Credit). The interest deduction allows the owner to “leverage” the funds attributed to the mortgage. This leverage then increases the affordability for the owner.
In the Washington DC metro area which includes Northern Virginia and suburbs of Maryland, the cost of housing is expensive relative to the majority of the United States. In terms of the size of the mortgage interest deduction utilized by tax payers, not surprising that California ranked number 1, followed by Hawaii. Next in line is the District of Columbia; Maryland is number 6 and Virginia follows at number 7. That means to me that the areas of the United States that have high housing costs will be disproportionately impacted by any changes to the tax code related to the mortgage interest tax deduction.
Kenneth R. Harney stated in the Washington Post on October 27, 2012, “Any significant cutbacks on deductions would hit people in the high-cost states the hardest, absent compensating savings from elsewhere in any forthcoming tax code changes.” The link to the full article: http://www.washingtonpost.com/realestate/limit-on-mortgage-interest-deduction-would-penalize-only-a-minority-of-taxpayers/2012/10/25/679d5270-1c60-11e2-9cd5-b55c38388962_story.html
Without the mortgage interest tax deduction it will make home ownership more expensive. Any decrease of the allowable amount will have an impact on the United States economy. There is a saying: “so goes housing, so goes the economy.” Owner occupied homes are key to the strength of the housing market in the United States.
To understand what benefits you may be able to claim consult your tax advisor. Additional information can be found at this link. http://homeguides.sfgate.com/mortgage-interest-reduce-taxable-income-come-back-refund-34524.html
It is important to understand all the myriad of factors in buying and selling real estate. Karen Briscoe and Lizzy Conroy are active and experienced Realtors® in the Northern Virginia, Washington DC and suburban Maryland market place and would be delighted to assist with this process for you, whether it is home buying and/or selling. Please contact via the means most convenient for you: www.HBCRealtyGroup.com, 703-734-0192, Homes@HBCRealtyGroup.com.