Many news reports concerning the "fiscal cliff" speculate a change to the longstanding policy that allows homeowners to deduct their mortgage interest payment from their income taxes could be part of the deal to solve the fiscal dilemma. The National Association of Realtors wants to ensure the nation's 75 million homeowners will continue to receive this important benefit. The national Realtor group is asking its members to contact Congress and tell their representatives to keep the mortgage interest deduction (MID) intact and to oppose any future plan that modifies or excludes the deductibility of mortgage interest.
Realtors contend the mortgage interest deduction is vital to the stability of the American housing market and economy. The Silicon Valley Association of Realtors, the local 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, is joining the national Realtor group in opposing any change to the MID.
"Reducing or eliminating the MID is a de facto tax increase on homeowners," says Suzanne Yost, president of the local trade association. "Homeowners already pay 80 to 90 percent of U.S. federal income tax, and this share could rise to 95 percent if the MID is eliminated."
Current law permits deductions of the interest paid on mortgage debt of up to $1 million on a primary residence and one additional residence. In addition, the interest paid on home equity loans of up to $100,000 may be deducted. Plans to reduce the MID by as much as $500,000 and/or limiting this benefit to a primary residence are being floated around in Congress.
"The MID facilitates homeownership by reducing the carrying costs of owning a home, and it makes a real difference to hardworking American families. Many middle-class homeowners base their annual financial planning on tax breaks such as the mortgage deduction," says Yost.
Yost explains the MID benefits primarily middle- and lower income families - 65 percent of families who claim the MID earn less than $100,000 per year; 91 percent who claim the benefit earn less than $200,000 per year. According to the IRS, more than 70 percent of the mortgage interest payments claimed as deductions is on returns filed by people with incomes between $60,000 to $200,000. Only about 1.4 percent of the total is claimed by taxpayers earning $1 million or more.
"For people who don't have hundreds of thousands of dollars in savings to buy a home outright, tax benefits like the MID help them begin building their future through homeownership. It's ridiculous to say that the MID is suddenly part of the deficit problem – the MID has been part of the federal tax code for nearly 100 years," says Yost.
Progress has been made recently in bringing stability to the housing market. "Any changes to the MID now or in the future could place the housing market and the broader economy under stress, and could effectively close the door on the American dream," adds Yost.
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 email or call the SILVAR office at (408) 200-0100.