Keep Homeowners' Tax Deductions
By: Rick Judson
April 3, 2013
There is a reason why the mortgage interest deduction has stood the test of time. It reflects a core value of America's citizens.
By reducing the after-tax cost of a mortgage, the deduction encourages homeownership and helps people enter the middle class and live the American Dream.
It is particularly important for younger families to gain a foothold on the homeownership ladder because they pay primarily interest in the early years of their mortgage.
Critics falsely charge that the home deduction is targeted to the wealthy. In reality, two-thirds of the tax benefits go to middle-class households earning less than $200,000 annually. Indeed, about 34 million taxpayers who represent about 90 million people will benefit from the deduction in 2012.
Becoming a homeowner and claiming the deduction is the reason most taxpayers itemize - 70% of homeowners with a mortgage will use the deduction in a given year. Those who don't likely benefited from it in the past.
Moreover, most economists agree that tampering with the deduction would harm home values. When you consider that a modest drop of 6% in home values would wipe out $1 trillion in household wealth, the aftershock to the economy and individual families would be staggering.
Yet, some are suggesting lowering the cap on the deduction by as much as 50%, paying little attention to the consequences. This would effectively raise taxes on younger families looking to own a home in more expensive metro markets.
Others have suggested eliminating the provision for second homes, which would penalize millions of homeowners who move from an existing home and buy a second home in a given tax year.
The evidence clearly shows that cutting the mortgage interest deduction would do far more harm than good by threatening the fiscal health of countless communities across the nation that rely on a healthy property tax base to fund schools, police and firefighters.
Polls show that more than two-thirds of Americans aspire to homeownership. Tampering with the mortgage interest deduction would deny the will of the American people by preventing many from realizing the opportunity to own a home of their own.
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