Capping Mortgage Interest Deduction Could Have
“Chilling Effect” on
Housing
According to Rick Sharga, executive VP at Carrington Mortgage Holdings, if
the mortgage tax deduction is eliminated, it would have a chilling effect on
the market and just be "one more disincentive, one more body blow to that
already beaten up borrower."
The good news is almost no one, Sharga included, believes mortgage interest
deductions would be eliminated. But like all deductions, "it's sitting
there like a piñata at somebody's birthday party," he says. "It is
tempting."
The real question, according to Sharga, is the dollar amount for deductions
that's ultimately agreed upon. "Depending on how high the cap is, that's
when I can answer the question: is it only going to affect a tiny amount of
households?
Currently, the amount of mortgage debt eligible for reduction is capped at
$1 million (that's the size of the mortgage, not the deduction). With the
average new home selling for under $300,000 and the average existing home
around $180,00, including condos and townhouses, reducing that to $500,000
would not impact the majority of U.S. homeowners.
Still, Sharga's "biggest fear" for the housing market in 2013 is
the pressure on the "middle, move-up market" and many Americans in
that category "are the people being targeted for tax increases."
If the Bush tax cuts are allowed to expire, the average U.S. family making
between $75,000 and $100,000 a year would see their tax bill go up nearly
$3,700 next year, The
WSJ reports, citing TPC.
With state and local taxes on the rise, any additional hit in the form of
capping mortgage interest deductions "might be the difference between
somebody buying a house or deciding" they can't afford it, Sharga says.
Given the still-tenuous nature of the housing market's recovery, and its
critical influence on consumer confidence and the economy broadly, politicians
would be wise to tread very carefully.
If the Bush tax cuts are allowed to expire, the average U.S. family making
between $75,000 and $100,000 a year would see their tax bill go up nearly
$3,700 next year, The
WSJ reports, citing TPC.
With state and local taxes on the rise, any additional hit in the form of
capping mortgage interest deductions "might be the difference between
somebody buying a house or deciding" they can't afford it, Sharga says.
1 comment:
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