Home Ownership. The American Dream. Since 1913, homeowners have been able to claim the interest paid on their residential mortgage as a tax deduction. Based on the December 2010 “Moment of Truth” report from the National Commission on Fiscal Responsibility and Reform, the current mortgage interest tax deduction would be replaced by a flat 12% tax credit for mortgages up to $500,000 (currently, it’s $1,000,000). The change would also exclude any deductions OR credits for mortgage interest on secondary residences or home equity loans.
The purpose of the tax deduction was to encourage home ownership. Many opponents argue that home ownership promotes stronger communities, lower crime, employment stability and a more educated population. Elimination of this tax deduction would undermine these core advantages and further de-stabilize the housing market and the overall economic recovery.
According to a recent Gallup poll, over 60% of the respondents oppose the elimination of the mortgage interest deduction. And of course, the change is being heavily opposed by large industry groups including the National Association of Home Builders and the National Association of REALTORS®. As expected, there are many who feel the change is a good thing, or at least worth considering, sparking quite a bit of debate, citing such benefits as workforce mobility and the reduction of frivolous real estate investing. And since the current deduction only applies if the consumer itemizes their deductions, it is also argued that the elimination of the deduction would effect fewer of the low to middle income families in this country since far fewer of them itemize on their tax returns.
What does this mean to REALTOR®S and the Housing Market?
I don’t think I have found a single comment from any REALTOR® or home builder in FAVOR of this change. The top reasons given? Additional declines in property values and the elimination of one of the biggest incentives to home ownership. As a REALTOR, you are being called upon by NAR to respond to a Call to Action to stop the elimination of the MID. There does appear to be quite a bit of public opposition to this change, by both consumers and organizations.
What’s you’re take on it? We’d love to hear how you feel this change to the MID will effect you as a REALTOR, your business, your family, and the economic and housing market recoveries.
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