An interesting fact that you may not know: The federal tax code was established in 1913. That makes it 100 years old this year! Back then, all interest was deductible on personal tax returns. But, of course, back then not many people had a mortgage, other then farmers. As time went on, Congress changed the tax code in 1986, eliminating the interest deduction for almost all consumer debt ie: credit card, auto, and personal loans. Lobbying from the real estate and mortgage industries kept the mortgage interest deduction in place for residential real estate
Now, as you know, Congress is considering the mortgage interest
deduction again. A recent NAR poll
reported that 79% of Americans want the mortgage deduction to stay put and real
estate lobbyists say losing it would jeopardize a still-fragile housing
recovery. On the other side, the
nay-sayers tell us that it inflates house prices. Plus, they say, it really only impacts the
wealthy since app. 25% of Americans Itemize their taxes and the rest take the
standard deduction.
At this point Congress has decided to take some middle ground. In
January they boosted the tax rate for single filers who earn more than $400,000
and married filing jointly who earn more than $450,000—that’s the top 1% of
filers. They also reduced the value of
mortgage interest and state income tax payments. This is $250,000 for singles and $300,000 for
married couples, thus affecting roughly another 3% of filers.
For the time being, home buyers
are much better off than they were as far back as the ‘70’s. This takes into consideration today’s home affordability
and historically-low home loan rate. If
you have questions about home loans, contact me and I’ll be happy to refer you
to a lender.
