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April 27, 2015

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Protect the mortgage interest deduction

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In an effort to find revenue sources and avoid the looming “fiscal cliff,” Congress and the White House are debating limits on a wide range of tax deductions. One of these is the mortgage interest deduction, a widely utilized tax break that Realtors believe is vital to the stability of the American housing market and our economy.

Specific legislation capping or eliminating the deduction has not been introduced. However, some pundits and experts have suggested that it could or even should be on the table as policymakers in Washington look for ways to address the U.S. budget deficit.

The National Association of Realtors has always been a supporter of the deduction. As 2013 NAR President Gary Thomas said: “Until Congress introduces specific legislation, there’s nothing to say about any proposed changes to the mortgage interest deduction. We will remain vigilant in opposing any future plan that modifies or excludes the deductibility of mortgage interest.”

If a deal is not reached, many believe a “fiscal cliff” could do severe damage to the economy nationally, and especially here in Nevada, where we’re still digging our way out of the worst economic downturn since the Great Depression. Some experts fear we could fall back into a recession if a solution is not reached. Of course, we Realtors believe this could have a significant effect on a housing market that is just beginning to rebound.

We’ve made some progress this year, but the housing market here in Nevada is still healing. Another recession could severely impact the strong sales pace and housing price appreciation we’ve experienced this year.

The debate over limiting deductions is an important one, but the deduction should not be part of it. Too many Americans rely on this crucial tax break.

This longstanding tax deduction encourages and sustains homeownership by reducing the carrying costs of owning a home. It also benefits families with moderate and below-average incomes, with 65 percent of families who claim the deduction earning less than $100,000 per year. In addition, American homeowners already pay 80 to 90 percent of U.S. federal income tax, and their share would rise if the deduction were eliminated or reduced.

Changes to this important homeownership benefit would harm the financial health of millions of hardworking middle-class families and dash the dreams they’ve worked hard to achieve, such as college, retirement or starting a small business.

The ability to deduct the interest paid on a mortgage can mean significant savings for many families in Nevada and throughout this country.

Tampering with the deduction could tip the economy into another recession, resulting in further job losses — something we can’t afford here.

It could effectively put the American dream out of reach for millions, shutting the door to homeownership. Realtors will fight hard to keep that door open for current and future generations.

Blane Johnson, of Incline Village, is the 2012 president of the Nevada Association of Realtors.

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  1. I wonder where the banks stand on this? They are the ones who profit off the loans they make with a portion of depositor's money.

    If people don't buy, they lose potential profits.

  2. Phase it out in increments. It has done a disservice to the US housing market and the American dream of home ownership. While encouraging the rich and famous to use it and abuse it. It [tax deduction] was and is an integral part of the housing bubble, subsequent crash, and the current years' long US housing market depression.


  3. Protecting the mortgage interest deduction also protects the Middle Class homeowner. Without this deduction, home ownership would be out of reach for many.

    Blessings and Peace,

  4. First we should do some limiting. For example: deduction should apply only to a primary residence; deduction not valid for refinancing that takes cash out of the deal - to include funds for renovations; deduction not valid for a replacement house unless the taxpayer meets the requirements for deduction of moving expenses; deduction limited to mortgages for no more than 85% of the selling price (requires a 15% down payment); deduction not allowed for mortgages on homes selling for more than 150% of the average price for the market.

  5. Eliminating the mortgage interest deduction will decrease the value of real estate because the monthly payments will be higher for the same property evaluation.

    If a wage earner is not allowed to deduct the interest from taxable income, they may easily experience owing ~25% of their yearly mortgage payments in taxes. Increased monthly payments will lower the value of the property in order to reduce the monthly payments back to their previous levels at purchase. $40-$60,000 in appraised value can easily be lost in the process.

    This is not true for an investor, who can write off the mortgage interest as a BUSINESS EXPENSE, whereas the property owner is NOT allowed to write off the mortgage interest amount. Remember, they are the job creators and we must not tax them in order to keep the economy humming.

    Eventually, most people will rent rather than buy and experience yearly rate increases in their rent rather than fixed mortgage payments. Those on fixed incomes will eventually be moved out into the streets and sleep in tents until their medication gives out and the winter gets too cold.

    "What's that war in Iraq doing for you?". The Iraq war was the most expensive war in America in 2012 dollars - including WWII. Cash to fund the war was borrowed internationally from countries like China, from whom the US borrowed the most money.

    How could it be that Iraq, a third world, poverty stricken country took six years to subdue using the most powerful military in the world and more money than WWII? Amazing but true.

    Increased taxes from elimination of the mortgage interest deduction will help to repay China who in turn will use that money to build up their military. Chinese military spending will be used to justify increased defense spending in America used to counter the (so-called) geo-political enemy which is simultaneously supplying products to companies like Target and Walmart to create jobs in America.

    So what's that war in Iraq doing for you now? Think about it - with conservative planning and guidance, Social Security, Medicare and public schools are next on the chopping block to divert increasing amounts of cash to satisfy the moral obligation of protecting America and keeping the great Satans at bay, i.e. the ones we need to create jobs in America.

  6. Well this bites big time. That deduction is vital to my tax return every year, no more deductions on the kids so this is whats left and if they take that away it's gonna hurt.