Loss of the Mortgage Interest Deduction Removes a Benefit of Homeownership

I consider the Mortgage Interest Deduction to be one of the primary, and most important benefits for homeowners in the current tax laws.  This article by the National Association of Realtors covers the issue of what the recent proposal to eliminate or alter the MID by the Obama Deficit Reduction Committee would do to home owners in the long term, so I am including this in my blog:

December 7, 2010

By Danielle Hale, Research Economist
In recent weeks, many proposals, suggesting a variety of changes to the tax system, have been discussed. The estimates below are for the complete elimination of these two tax benefits at current marginal tax rates, one of the most extreme possible changes.
Mortgage Interest Deduction Facts:
• 51 million—or 68 percent—of the approximately 75 million owner-occupied houses in the United States in 2009 had a mortgage.
• 38.5 million taxpayers claimed a deduction for mortgage interest, deducting a total of $470 billion, in 2008.
• The average taxpayer claiming the MID deducted $12,200 from taxable income in 2008.
• Therefore, the average taxpayer saved $3,050 in taxes by claiming the mortgage interest deduction¹ .
• The total tax savings from the MID in the United States in 2008 was $117 billion.
Real Estate Tax Deductions Facts:
• 42 million taxpayers in the United States claimed a deduction for real estate taxes in 2008, deducting a total of $172 billion.
• The average taxpayer claiming the real estate tax deduction subtracted $4,090 from taxable income in 2008.
• Therefore the average taxpayer saved $1,020 in taxes as a result of the real estate tax deduction² .
• The total savings from the real estate tax deduction in the United States in 2008 was $43 billion.
Eliminating Deductions: Losses for Home Owners and the Nation
If the mortgage interest and real estate tax deductions were eliminated, the loss would not be a one-year event; homeowners lose out on these potential savings each and every year. The present value³ of these lost savings could total $3.2 trillion. The value of all owner-occupied real estate in the United States in 2009 was $19.3 trillion⁴ . If the lost tax savings are fully capitalized into the price of houses, the average decline in value in the United States would be 17 percent. From the individual perspective, the median priced home in the United States in the third quarter 2010 was $177,800. A decline in value of 17 percent, as projected, would mean a loss in home value of $29,500 for the typical home owner.
These estimates, because they are based on a complete elimination of these deductions, can be viewed as a high-end estimate. Other changes will result in smaller losses to home owners. Additionally, national results are computed by looking at national averages. A very different picture can result when looking at the state level depending on the characteristics of the housing market, tax payers, and homeowners. For state information, contact data@realtors.org.
¹Marginal rates range from 10 to 35 percent. A 25 percent rate was used to calculate the tax savings.
²Ibid.
³Present value calculation assumes 5 percent discount rate and 1000 year time horizon.
⁴As measured by the American Community Survey. The Federal Reserve Flow of Funds for 2009 estimated the market value of household real estate to be $17 trillion which would raise the estimate of the decline in value to 19 percent.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®.

The Role of a Real Estate Agent

The role of a real estate agent is to guide you through the buying or selling process, taking the time to make sure you understand every step of the transaction. As a Realtor, I am absolutely committed to fulfilling your needs with the highest level of professionalism, expertise and service.



The Role of a Realtor is more than showing houses.

 My commitment to your satisfaction is the foundation from which a solid business relationship is built. Working with all kinds of people on a daily basis, and selling all kinds of homes over the years have enabled me to be able to really define my role as an agent for a client.

I realize that people do business with people they trust. I am interested in helping you as my client to achieve your goals.  Through this I am committed to establishing a long-term relationship based on trust. I pride myself on being knowledgeable and staying current with changes in the industry that will affect the success of your transaction. You have worked hard to be able to purchase the home of your dreams. I feel the responsibility to make those dreams a reality and pursue the right solution enthusiastically.

Every year I typically many times over the continuing education requirements for the State of Michigan as a Realtor.  In that way I can stay on top of trends, new technology and changes in the Real Estate industry.  Over the last 5 years alone there have been numerous changes in lending practices, and loan programs and hurdles are more challenging for buyers to get into a home because of that.  I have had to learn a great deal about credit repair, and connecting with terminals that can help my clients overcome these barriers. 

So the role of a real estate agent is much more than just showing and selling houses.  It is keeping current with the real estate industry, and passing along the advantages and strategies to helping your clients take advantage of those changes.  That is what I specialize in.  If you are interested in getting started with buying a home, or perhaps you need to sell your home, give me a call at 269-441-8182 or visit my website at: www.michaeldelaware.com.


Staying on top of changes in the industry makes it possible for me to better serve my clients.