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Mortgage Interest Deduction Pays Dividends for Homeowners

Wednesday, February 9, 2011

Although recent reports of plans to eliminate or modify the mortgage interest deduction are widely exaggerated, REALTORS®   remain actively engaged to ensure that the nation's 75 million home owners will continue to receive this important benefit, said the Silicon Valley Association of REALTORS® (SILVAR).

"If altering the MID ever becomes a discussion point in Congress, the REALTOR®  community stands ready to defend it," said SILVAR President Gene Lentz. "The MID is both a powerful incentive for home ownership and one of the simplest provisions in the tax code."

The MID allows an individual to deduct mortgage interest paid on mortgage debt of up to $1 million. The deduction is available for interest on mortgages for a principal residence and one additional property. Individuals claiming the MID also must itemize their taxes.

The ability to deduct the interest paid on a mortgage can translate into significant savings at tax time. For example, a family who bought a home in 2010 with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file next year.

According to the most recent IRS tax return data available, 65 percent of families who claim the MID earn less than $100,000 per year. "Homeowners already pay 80 percent to 90 percent of U.S. federal income tax, and among those who claim the MID, almost two-thirds are middle-income earners," said Lawrence Yun, chief economist of the National Association of REALTORS®. "If the tax break is modified or eliminated, home values could fall 15 percent nationwide, as buyers discount the value of the MID in their purchase offers."

The MID saves the average home owner thousands of dollars at tax time and helps American home buyers get into their first house, said Lentz.

"In today's market, eight out of 10 home buyers must borrow money to buy a home," said Lentz."For aspiring homeowners who don't have hundreds of thousands of dollars in savings to buy a home outright, tax benefits like the mortgage interest deduction help them begin building their future through home ownership."


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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