Tuesday, November 20, 2012

Think The Fiscal Cliff Will Take Away Your Mortgage Interest Tax Deduction?

It's big news this last few weeks, calling it the Fiscal Cliff. Yes, we are on the edge.

Regarding Real Estate and our favorite of homeowner deduction, this is the skinny on what changes may occur. Although I don't think it will be completely taken away, the majority of Americans will be affected by it very minimally even with the suggested changes.

Examples here of what it may do if it passes:

Make less than 40k a year and you normally save about 100 bucks with that write-off. Not a lot of that earning bracket even itemizes their deductions so they don't get the cash. Under 250k? average savings on your taxes is between 1200-2600/year. Nice little chunk of change. Those big earners of over 250k annually, and ALL of them itemize, average tax break is 5400.

Several suggestions for changes to the mortgage interest deduction, which, right now, reduces income tax revenue almost 80 billion per year, are as follows:

1) Cap the deduction at 500k of the homes value and only for primary residences.
2) Limit the overall deduction to just 25k worth of mortgage interest.
3) Eliminating it for any tax payers that earn 250k or more.
4) Removing the benefit for 2nd homes.
5) Take the deduction away entirely.

So, be aware of the interest deduction, the fiscal cliff too. 

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