April 5th, 2011 8:52 AM by Preston Ware
The Proposed tax cut of repealing mortgage interest deduction will not affect the average homeowner or person looking to purchase real estate in the next few years as much as we think. The proposed legislation to play around with our sacred deduction is intended to place yet another burden on the wealthy that quite often are savvy enough to avoid a bunch of taxes anyways.
President Obama’s tax cutting commission headed by Alan Simpson and Erskine Bowles has a number of tricks up it sleeves to start putting a dent in our gigantic 1.29 trillion dollar federal deficit. Among some of the other suggestions: raising the Social Security age to 69, cutting Medicare outlays, getting rid of the Alternative Minimum Tax,etc.
At first glance, examining the concept of doing away with our sacred tax deduction, we hear executives in the real estate business crying that this will put an end to what little momentum we have built up as our housing market sputters along. Looking at this further it most likely will not affect the mainstream as much as we think because the itemized interest deduction will still be in place for those taxpayers paying interest on loans less than $500,000.
The legislation zeros in on mortgage interest on loans greater than $500,000. With the decline in home values over the past 5 years you would need to purchase an awful lot of house to get over that threshold. Being in Palm Beach County Florida, I know my home has been discounted 50% so I am in no danger of losing my deduction. Even high end customers are also more mindful of living within their means these days compared to five years ago.
Customers that are shopping in the $500,000 category most likely have other means of avoiding taxes. Quite often they pay cash which means no deduction anyways.