Tax time less taxing for homeowners
Plans to cut mortgage interest deductions could have 'disastrous consequence,' Realtor says
Owning a home offers myriad benefits throughout the year, but some of the financial advantages of home ownership are most apparent at tax time.
"As many of today's hard-working American families are feeling a financial squeeze, the tax benefits that can come from owning a home can be a welcome relief," said Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., and president of the National Association of Realtors.
A number of tax deductions and credits are still available for home owners. These include deductions, with specific limits, for mortgage interest and capital gains on home sales, and credits for certain energy-efficient home improvements. Even with these benefits, homeowners pay 80-90 percent of all U.S. federal income taxes.
"It's been suggested that many of today's tax incentives for home ownership primarily benefit wealthy individuals, but that's simply not true," Phipps said. "As today's public debate continues about what home ownership means for families, communities, and the nation's economy, there's no question that for many, owning a home is still the best way to begin building wealth."
An estimated 91 percent of home owners who claim the mortgage interest deduction earn less than $200,000 a year, and the ability to deduct the interest paid on a mortgage can mean significant savings at tax time, according to the NAR. For example, the organization calculated that a family who bought a home in 2010 with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file this year.
"Realtors see the very real positive impact of home ownership every day with our clients," Phipps said.
"Recent proposals to reduce or eliminate the mortgage interest deduction and remove government support of the housing finance market could have disastrous consequences for the economy, not to mention making it harder or nearly impossible for millions of families to own their own homes," Phipps said. "We believe America must continue to invest in home ownership, for the future of our families and our nation."