What is going to happen with the Mortgage Interest Deduction?
As long as I have known real estate (which is a long time), I have known the Mortgage Interest Deduction (MID). It has been a good friend to me as well as every homebuyer we have represented to date. The MID is one of the key advantages of owning real estate. For those not familiar with it, it allows you to deduct your mortgage interest on your tax return. It is a big incentive of homeownership that your itemized deductions will be going up and for a lot of people, it allows them to itemize for the first time instead of just taking the standard deduction. It might be the main decision for someone when they look at their rent vs own analysis. And it makes other expenditures more relevant where they could not be deducted prior as the total of those deductions fall below the standard deduction.
Unfortunately, with the fiscal cliff quickly approaching and with no plan of attack on how to deal with it, everything is on the table to "play" with. In the past, the MID was always considered "sacred", that it would never be played with, but it sounds like that time has passed.
I think it is extremely unfortunate that due to the reckless spending of the United States Government there is now the potential that current and future homeowners will be screwed and thus paying more in taxes to help alleviate the debt. Thank you Congress!
Are both Mr Obama and Mr. Romney liars when they say that they will not be raising taxes for the middle class?
Well, if the MID is stripped, you are not only raising taxes on the middle class (a very high percentage of owners), you are outright screwing them. And instead of encouraging homeownership in a time where the country desperately needs it, you are discouraging it.
Many options are being discussed so perhaps it iwill not be not eliminated or it might be capped at a certain amount or allowed if a home is worth under $500,000 or any variation thereof. Time will tell. But just the fact that it is on the table makes me upset. If politicians and Congress want to screw with the American Dream, that is their prerogative but I do not have to agree. And every Realtor Association from coast to coast will not agree, either.
And on the local front, we have 2 more headwinds facing the Philadelphia Real Estate market, one being the AVI (real estate tax rape) and the second being that tax abatements are up for discussion to be modified. We are not setting the stage here for investment and homeownership locally which is insane as the goal should be the opposiste. However, it is still early in these discussions so we all have the opportunity to have our voices heard.
And in the meantime, before the Presidential election, I just wish both candidates will come clean and admit that higher taxes are a possibility for the middle class if the MID is tinkered with...
For a very comprehensive article on the subject, I would suggest reading "Changes to MID Seen Increasingly Likely" as reported by Inman News.
What are your thoughts?
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