Let’s Hope Federal Lawmakers Leave Deductions for Mortgage Interest and Property Taxes Alone
It’s no secret that the state of Illinois is suffering through serious financial troubles today. But two proposed solutions to this financial mess would seriously hurt homeowners.
The Illinois Association of REALTORS® recently ran a feature story looking at the impact that two potential strategies for reforming the federal tax code could hurt homeowners in the Chicago area.
First, is the possible elimination or reworking of the mortgage interest deduction. As homeowners know, each year owners can deduct from their income taxes the amount of interest they paid throughout the year. This saves homeowners more money early on in the mortgage-repayment process. That’s because those first few years of mortgage payments are mostly interest.
The possible elimination of the federal tax deduction for state and local property taxes would also be a big hit for local homeowners.
Homeowners can deduct the amount of property taxes they pay on their home with each year’s income taxes. Because property taxes are so high in the Chicago area, local homeowners would take a big financial hit if this deduction is eliminated.
In fact, the hit from the loss of the property tax deduction would be far more severe for most Chicago-area homeowners than would be the loss from the elimination of the mortgage interest deduction.
Officials with the Illinois Association of REALTORS® said that more Illinois homeowners take advantage of the property tax deductions than the mortgage interest deduction. According to the association’s numbers, more than 1.77 million Illinois taxpayers used this deduction in 2014. A smaller 1.49 million Illinois homeowners claimed the mortgage interest deduction.
The deduction for state and local property taxes also increases in value over time. That deduction will increase as the value of local homes also rises. As homes’ values rise, so do the taxes that their owners pay.
Let’s hope, then, that federal lawmakers preserve these financial incentives for owning a home. There are also ways to raise revenue, methods that don’t punish people financially for owning homes.