November 1st, 2012 categories: Chicago Real Estate News
If you’re a homeowner the odds are great that you’re a fan of the mortgage interest deduction. Every year at income-tax time it allows you to deduct the amount of mortgage interest you paid the previous year. The deduction is one of the biggest perks of owning a home.
But politicians are eyeing that deduction. Many are considering eliminating or reducing it as a way to help reduce the country’s soaring national debt.
Real estate writer Ken Harney recently took a closer look at the deduction and what it means to homeowners and the federal government. The results are illuminating.
For instance, Harney cites the Joint Committee on Taxation, which says that the mortgage interest deduction will cost the federal government $484.1 billion in lost revenue from fiscal year 2010 through fiscal year 2014.
During the same period, the federal government will lose $120.9 billion more when homeowners write off local and state property taxes.
In other words, these homeowner deductions have become tempting targets for politicians. They represent a huge source of revenue that could seriously dent the country’s debt.
Critics of the mortgage interest deduction say that it’s a regressive tax, one that helps wealthier people more than it does poorer people. That’s because wealthier people tend to own larger, more expensive homes. They also tend to pay higher taxes on these residences. They then claim larger deductions each year.
Cutting or reducing this deduction, though, would take political courage. Homeowners aren’t likely to forget the politicians who lead the charge to cut this perk. And the National Association of REALTORS® and National Association of Home Builders both vow to fight any efforts to cut back or eliminate the deduction.
Personally, I don’t understand why legislators would do anything to eliminate a major benefit of buying a home. Homeownership is good for the health of the country and its economy. Cutting this major deduction doesn’t seem like good policy to me.