Some Good and Bad News on the Mortgage Interest Deduction

I agree with Gerard #17.  And what better time when housing prices and interest rates are low, the deduction won't make much of a difference anyway.  The banks don't want to see mortgages paid in full.  That's why they came up with all the refinancing opportunities.  That way a homeowner can refinance unsecured credit card debt into a secured loan on their most "valuable asset" - their home.  What geniuses the banks are. (sarcasm)

Thanks Pamela!   Please share your thoughts with NAR as I've done.  (FYI, I amended my post after finding some grammatical errors.)  

I believe there is a standard deduction for the interest deduction. I believe it is up to 10k in deductions before you do a schedule c. For us Realtors we use schedule c because we are self employed and have many deductible expenses. People who have w2 income will probably use the standard deduction so it won't matter how much interest they paid unless they have a 300k home or more and the interest is 10k or above.

John,

This is great news!  For a single, self employed, childless person like myself, my mortgage deduction is huge!  The NAR (2009 Home buyers and sellers profile) estimates that about 31% of buyers are single and that 63% have no children living in the home, and therefore no child tax credits.  I think the mortgage interest deduction is HUGE for more Americans than we realize!  Thanks for you good news!

John--I think it more symbolic than anything.  Even though it might not be all that good or all that bad it still symbolizes the advantage of being a homeowner.  One that I would prefer not to loose.  Thank you very much, to the lawmakers, who haven't changed it yet.

Unfortunately I think that the lawmakers will do whatever they can get away with if people don't speak their minds.

Congratulations on being included on AR's daily newsletter.

Another problem may be the natrional 3.8% sales tax on the sale of a home that kicks in 2012. According to a web blast going around it is in the Obama Health care plan and is one of the ways they have of paying for the health Care Plan.  That would put a real DAGGER in home sales and if they then eliminate the tax deduction, our business will surely be hit very hard!

Let's hope that they indeed leave this alone. At least until the economy turns around.

I agree with you, John - let's do away with all subsidies. While the home interest deduction is a sales aid for the real estate industry, that money  is coming out of taxpayers' pockets.  In other words, to provide an incentive for those who can afford to buy a home, the remainder of the population has to reach into their pockets to make homeownership more attractive (at least at first blush).  It's reverse discrimination.

So many of these subsidies have become "sacred cows" that have far outlived their initial purpose.  Special interests have captured the tax code - we subsidize the oil companies..the same ones who make $10 billion quarterly and continually manipulate gas prices...WTF?!!  Nobody likes to give up freebies, but something has to be done to forestall America's slide into becoming a third-world country...and no, I'm not a Tea Partier!  We've just been spending on a national credit card with no due date, and now the bill has finally coming come.

It's time to bite the bullet, my real estate friends, and let the industry stand on its own legs.

I think the perception may be worse than the reality, but I do not think the MID should be eliminated. Even the slightest possibility of another negative impact on housing is too big a chance to take. There is so much waste in our government today, find it somewhere else. It is just still too fragile. 

I don't think we need to make the market any worse than it is and this would only be an additional blow to homeowners, many are already struggling enough!

John,

I believe the smartest thing I ever did relative to mortgage finance was to go to a 15 year amortization.  I refinanced my VA loan in 2001--went from 7.5% with 25 years remaining to 4.5% on a 15 year amortization.  My payment went up $18/month, and I'm six years from owning my home free and clear.  On the 30 year loan with 25 years to go, more than 75% of my payment was interest.  With six years to go on the 15 year loan, I am nearing 75% going to principal.

For me, the interest payment deduction becomes less appealing/important each month.  When we break the back of indebtedness, all things are brighter.  Each month, I become a little more independent, and have more freedom to enjoy my work and my life.  Just think what it would be like for America: FREEDOM!!!

This is about the last deduction I'd eliminate.  If we could go to a true flat tax I'd be willing to let it go.  The two deductions that piss me off the most.

1) You can write off state income tax, sales tax, and local propety tax

2) Union dues

John, the interest deduction is the one thing, those of us who have not been able to get refinances or loan modifications have left to help us out.  The one place we can still get a break.  I'm wondering where they did the study to reflect "the deduction is much less of a motivating factor in home purchases than many believe"!  Thanks so much for update!

John (#30) - Well said!  Think about what you'll be doing with an extra $1-2k every month.  For sure, you'll invest some of it.  However, it's inevitable that you'll spend some of it right in your local community which will force a demand for labor which will force a demand for housing.  

Could you imagine what would real economic growth could occur if huge flows of money were redirected toward Main Street as opposed Wall and K Streets?  

Thanks John for this recent up date.  I'm sure we're all waiting to see what the final decision is going to be.  Margaret C.