Housing is the engine that drives this economy, and to even mention reducing the tax benefits of homeownership could endanger property values. Home prices, particularly in high cost areas, could decline 15 percent if the recommendation to convert the mortgage interest deduction to a tax credit gets implemented. That means about a $20,000 to $30,000 reduction in housing equity for a typical homeowner.
The Tax Reform Act of 1986 proved that when the tax benefits associated with real estate ownership are curtailed, the value of real estate declines. In this case, the resulting loss of value in the commercial real estate sector was 30 percent.
The current cap permitting deductions of the interest paid on mortgages of up to $1 million has not been modified or indexed since it was adopted in 1987. I am surprised that the panel would even consider reducing the cap. Basing the cap on complex regional loan limit calculations makes no sense. In California alone, more than a dozen Federal Housing Administration (FHA) limits are in effect in various parts of the state.
Eliminating the mortgage interest deduction would hurt middle-income families the most. According to IRS tax return data from 2003, 52 percent of the families who claim the mortgage interest deduction have household incomes between $60,000 and $200,000.
NAR is waiting to take an official position until the President's Advisory Panel on Federal Tax Reform makes an official recommendation. However, we're concerned that the commission is putting housing on the cutting block.
Thank you,
David Rigney
"David delivers the American dream"
Professional Realtor® in the Chicagoland Area
24 Hour Real Estate Info. Line: 1.800.731.1162
Direct: 847.732.7436
Fax: 847.625.9371
American Realty Services, Inc.
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