Tax deductions on mortgage interest – some clarifications
Tax payers enjoy the benefit of tax deduction on the interest they pay on mortgage loans. The tax policies of government help reduce the cost of a home while buying, and millions of tax payers – especially those buying homes from the high-end property segment – are happily making use of this benefit, although it is costing the exchequer heavily.
Looking back in the history – a deduction for mortgage interest was started to be allowed, when Congress established the modern income tax in 1913. According to the Congressional Research Service, during those days only few Americans owned homes and it was not envisioned that this concession will spur homeownership as of today. As per Joint Committee on Taxation statistics, nearly 37 million American tax filers now use the mortgage interest deduction.
Analysing the statistics provided – this subsidy is being utilized highest in states where housing costs are more – such as California and Hawaii, and being used widely in Texas also. According to Tax Foundation figures in Texas, the average deduction for tax filers claiming the break was $9,955 during the year 2008.
Actually not all home buyers can claim this concession, because the value of the tax break is tied to how much debt one takes on. The tax deduction is not enough to make a difference to their taxes for people buying lower-cost homes and they can use the standard deduction allowed. Renters cannot avail this subsidy. This benefit is mostly applicable for those who buy higher-priced homes – ironically.
According to data compiled by the National Association of Homebuilders, older couples when they pay tax are not the ones to benefit most from this deduction and the average mortgage deduction is recorded highest for home owners in the age group between 35 and 45.
For example in Texas, the average mortgage interest deduction is highest for those earning more than $200,000 – according to Internal Revenue Service data. For those earning less than $50,000 – the average deduction is less by $7,900 to $10,300 than those earning $200,000.
It is reported that proposals are under way in 2011 budget to limit the mortgage interest deduction for families with incomes over $250,000. The National Association of Realtors said the change could trigger yet another crisis in home values, even as we struggle to recover from the first.
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[...] Tax payers enjoy the benefit of tax deduction on the interest they pay on mortgage loans. The tax policies of government help reduce the cost of a home while buying, and millions of tax payers – especially those buying homes from the high-end property segment – are happily making use of this benefit, although it is costing the exchequer heavily. Read More…. [...]