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Save My Mortgage Interest Deduction <--- New Site from NAHB for homeowners.. Peep below- Don't let the government take this tax deduction away and keep rasing them every way possible!
Save My Mortgage Interest Deduction <--- New Site from NAHB for homeowners.. Peep below- Don't let the government take this tax deduction away and keep rasing them every way possible!
Mortgage Interest Deduction Under Attack
Americans overwhelmingly oppose any action by Congress to tamper with the mortgage interest deduction, but it could be eliminated or scaled back as Congress and the Administration move forward with the important task of deficit reduction.
The consequences of such an approach to deficit reduction would be devastating for home owners, the housing market and the nation’s economy.
SaveMyMortgageInterestDeduction.com is dedicated to preserving the mortgage interest deduction and protecting homeownership. Please join us in this important effort.
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Frequently Asked Questions About the Mortgage Interest Deduction
Q: The mortgage interest deduction is considered a cornerstone of American housing policy. How does it work?
A: The mortgage interest deduction helps make homeownership more affordable by allowing home owners to deduct the interest that they pay on the mortgage for their home when calculating their annual federal income tax. The mortgage interest deduction has been a part of the nation’s income tax code since its inception in 1913.
Q: Can you give me an example of how the deduction benefits a typical home owner?
A: Let’s look at a family with a joint income of $80,000 and a mortgage of $180,000. Assuming that the interest rate on the mortgage is 5.5 percent, the family will save $7,050 in taxes during the first five years of ownership. The amount of the deduction declines slightly each year as the amount of interest that the home owner pays drops and the portion of their monthly payment that is applied to the loan principal increases.
Q: What forms do I need to submit to the IRS to claim the mortgage interest deduction?
A: You will need to itemize on your tax return to claim the mortgage interest deduction. At the end of every year, your mortgage lender will provide you with a statement showing how much interest you paid during the year. The lender will also provide that statement to the IRS, so you do not need to send a copy with your tax return. However, be sure to keep that statement for your records.
Q: Is it true that only wealthy people benefit from the mortgage deduction? Who benefits most from the mortgage interest deduction?
A: Opponents falsely argue that the deduction is only for the wealthy. In fact, according to Congressional estimates, nearly 70 percent of the tax benefit of the deduction is collected by home owners with incomes of less than $200,000. Moreover, the deduction is most valuable for younger households who tend to be recent home buyers with large mortgages, small amounts of home equity and growing families. IRS data indicates that the largest deduction dollar amounts go to people aged 35 to 44. As a share of household income, the largest amounts go to those aged 18 to 34.
Q: How does the mortgage interest deduction make the tax code more progressive?
A: A tax system is “progressive” when higher-income taxpayers pay a higher average tax rate.
Sixty-eight percent of the tax benefit from the mortgage interest deduction goes to taxpayers with incomes under $200,000. However, these households pay only 43 percent of all taxes, so the deduction makes the tax code more progressive by reducing the average effective tax rate for these home owners.
Eliminating the deduction would increase the share of total taxes paid by those earning less than $200,000 and make the tax system less progressive.
Q: Is there a limit on how much mortgage interest a taxpayer can claim?
A: Home owners may deduct interest on up to $1 million of debt on a mortgage used to purchase a home and up to $100,000 in home equity loan debt. These limits were set in 1987, and they have not been adjusted for inflation since then.
Q: Can a home owner deduct the mortgage interest on more than one home?
A: Interest on the mortgage on a principal residence and a second non-rental home is deductible. This rule helps home owners who sell an existing home to buy a new home by allowing the owner to deduct the interest allocable to both homes in a given year.
Q: Can I claim the mortgage interest deduction on a construction loan used to build my home?
A: Yes, you can claim interest on a construction loan for up to 24 months while your new home is being built. Consult with your tax advisor or the IRS for details.
Q: What happens if I refinance my mortgage loan? Is the interest still deductible?
A: Yes, interest on a refinanced mortgage loan is deductible if the mortgage meets all of the other criteria for the mortgage interest deduction. Your tax advisor or the IRS can provide you with the specifics.
Q: I have heard that only about 25 percent of all taxpayers benefit from the mortgage interest deduction. Is that true?
A: No, it is not true. Such a claim is misleading because it ignores the consumer’s “life cycle” of renting and owning homes. Most home owners will claim the mortgage interest deduction during their lifetime. Typically, a taxpayer will begin his/her working life as renter, become a first-time home buyer, claim the deduction, and then stop claiming the deduction after his/her mortgage debt is sufficiently paid down.
Near the end of a mortgage term, significantly less of the home owner’s monthly payment goes toward interest, so owners with older mortgages may find it to their advantage financially to take the standard deduction and not itemize.
The more relevant question is: What percentage of mortgage interest paid is claimed as a tax benefit? Since 2000, 86 percent of all mortgage interest paid by home owners has been claimed on income tax returns. Clearly, most home owners with a mortgage benefit from the deduction.
Q: I have always thought of the mortgage interest deduction as being very important, and I would oppose any effort to eliminate it or limit it in some way. What do other people think about eliminating or altering the mortgage interest deduction?
A: Americans overwhelmingly oppose any action by Congress to tamper with the mortgage interest deduction. Seventy-nine percent of voters polled by Public Opinion Strategies, a national political and public affairs research firm based in Alexandria, Va., said they support retaining federal tax incentives to promote homeownership.
Both home owners and renters were polled in the September 2010 survey, and support for the mortgage interest deduction cut across gender, age, partisan, ideological, education and regional lines.
Q: How many of the renters who were polled said they support homeownership tax incentives?
A: A slightly higher percentage of renters – 82 percent – indicated that they favor providing tax incentives to promote homeownership. Among the renters who were polled, 58 percent said they have used the mortgage interest deduction in the past or hope to use it in the future.
In ranking the importance of current deductions, renters indicated that the mortgage interest deduction is second in importance only to the deduction for medical expenses. (72 percent vs 71 percent).
Many renters expect to become home owners, so this support for the mortgage interest deduction is natural given the high share of interest payments these buyers will make in terms of their total monthly mortgage payment.
Q: What would happen if Congress eliminated the mortgage interest deduction or limited it in some way?
A: Home owners do not expect to lose their mortgage interest deduction, and prospective buyers anticipate taking the deduction. Changing “the rules of the game” would have a significant impact on the market in terms of home owner and home buyer behavior.
As a result, after-tax housing costs would increase, and demand for housing would decrease. In turn, reduced demand would depress home prices, producing a sizeable loss for existing home owners. With housing markets already struggling due to the ongoing effects of the recession, such a change in home values could weaken the economic recovery and perhaps drive the nation’s economy back into recession.
Q: What can I do to make sure that Congress doesn’t tamper with the mortgage interest deduction?
A: Most important, let your Senators and Representatives know that you oppose any change to the tax code that would alter the mortgage interest deduction in any way.
You can also help spread the word. The majority of the nation’s households – almost 70 percent – are home owners, and most would be negatively affected if the mortgage interest deduction was eliminated or cut back. They need to be warned about this serious threat.
Copyright © 2010 National Association of Home Builders.
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