The Mortgage-Interest Deduction: Should It Be Reduced in Favor of Jobs?
September 20th, 2011
September 20th, 2011
Last week the National Mortgage News ran an article, “How to Pay for the Obama Jobs Bill? Answer: Cut the MID,” in which it talked about how the White House budget office is proposing to reduce the amount of mortgage interest that homeowners, making more than $250,000 a year, can deduct from their income taxes in order to help pay for the $450 billion American Jobs Act.
What this means, according to the article, is that if a married couple, who makes more than $250,000 a year, paid $10,000 in mortgage interest and deducted $3,300 from their taxes in 2010, beginning in 2013, they would only be able to deduct $2,800.
While talk about cutting or eliminating the mortgage-interest deduction has been discussed on Capitol Hill for a number of years, it is still a popular tax break with homeowners. So, what exactly is the mortgage-interest deduction?
The mortgage-interest deduction allows taxpayers who own a home, have a mortgage and itemize deductions on their tax return to reduce their taxable income by the amount of interest paid on the loan. Mortgage interest includes interest paid on the mortgage for a principal residence and a second home, home equity lines of credit, and construction loans. Interest cannot be deducted on more than two homes. According to the IRS, “a home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking and toilet facilities.”
You can deduct the interest on only the first $1 million of mortgage debt, regardless of whether it is your principal or second home. You can also deduct the interest on up to $100,000 in home-equity loans, even if the money isn’t used for home improvements.
The mortgage-interest deduction is offered as an incentive to encourage home ownership, especially for people who continuously rent. With the availability of this tax deduction, you should consider whether purchasing a home is right for you. Contact Grandview Lending for more information on the various home loans available. Our mortgage calculator will help you determine how much interest you’ll pay on your mortgage over the lifetime of your loan.
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