Are We Losing the Mortgage Interest Deduction?
There’s a lot of talk in the news about the financial cliff, and the expectation of both sides giving in. One item that some want to be on the table is the mortgage interest deduction. Actually, this has been brought up for quite a number of years and was brought up in 2010 as well.
What is the mortgage interest deduction
When filing out your taxes, you can deduct the amount you paid for your mortgage interest against your gross income. It’s especially loved in areas where the cost of housing is high. It’s also a way that home investors can provide savings back to their renters.
How much would I lose?
The San Jose Mercury News published an article with some charts using the 2010 rates and income levels. For Santa Clara County, the median price was $610,500, and the first full year’s interest is $16,945. This would yield a tax savings of $5,084 which could be a nice vacation.
If you’re a renter, your rent may go up if your landlord loses their deduction. These costs usually get passed along down the line.
Is there anything good about the phaseout?
Some believe that a tax deduction is inefficient and a tax credit would be a better way to help more people. This blog post at HSH.com explains in greater detail about how the mortgage interest deduction was created, and their opinion as to how it’s not helping those it should.
SFGate also explains the history and the effectiveness of the mortgage interest deduction. Their conclusion is that it may change form, but it will always be a part of our tax structure.
So, if you’re concerned, find a professional tax advisor and review your current mortgage and taxes, then you will know a firmer number. Contact your representatives and let them know how it will impact you.
Do you think the federal government will phase out mortgage interest deductions?