Tax season is upon us once again and millions of Americans will delve into the often uncomfortable exercise.
Most homeowners are already familiar with the mortgage interest deduction, which allows a taxpayer to deduct mortgage interest paid from their total earnings for a given year. And this little perk of ownership is being targeted by Congress as a potential tax revenue generator, as it has always been as far back as I can remember.
What that means is that Congress is considering lessening or removing altogether the deduction for some homeowners. While the deduction isn't currently used by all homeowners, it matters in the grand scheme of things.
For those homeowners who do take the mortgage interest deduction, it can equate to significant tax savings. Depending on where you live and your total household income, families stand to save anywhere from $2,000-$10,000 each tax season.
The deduction originally was intended to create a tax benefit of homeownership that could help broad swaths of the American public to afford homes. While a recent study found that the deduction tends to benefit wealthy families more, not everyone agrees with that assessment.
In the past, the administration repeatedly has proposed curbing the mortgage interest deduction for most individuals who make more than $200,000 a year, or more than $250,000 for married couples.
When the issue has come up in recent years, it's been met with strong opposition by industry groups like the National Association of Realtors and the National Association of Home Builders. These groups contend that the deduction encourages homeownership and gives the middle class a better shot at financial security.
Even if Congress were to only target the incomes mentioned above, that would significantly impact families living in high-cost areas.
Congress estimates the tax perk represents about $175 billion in annual lost tax revenue, so you can see why it's often a topic of discussion.
We believe that wide cuts stand to threaten the nation's housing markets, which is why those of us who work in the real estate industry every day pay attention when we start hearing the topic come up. It's why our trade group, NAR, is so adamant about fighting to keep the deduction in place.
We'll continue to follow this news closely.