This deduction will change in the future. The federal government needs money.
By Kenneth R. Harney October 28, 2012
WASHINGTON — Limiting the homeowner mortgage interest deduction came up in two of the presidential debates, but specifics about who would be affected and how much they might lose in tax benefits were minimal. To put some rough numbers on the issue, here’s a quick primer on the mortgage interest deduction and related housing write-offs.
How big are they? Very big — which is why they have become such a tempting revenue-raising target for candidates seeking to reduce the massive federal deficit. The mortgage interest deduction alone will cost the federal government $484.1 billion from fiscal 2010 to 2014 — $98.5 billion in 2013 and $106.8 billion in 2014, according to estimates from the congressional Joint Committee on Taxation. Write-offs by homeowners of local and state property taxes account for an additional $120.9 billion during the same four-year period.
Keep in mind that what costs the federal government also represents significant tax savings for the people who take the deductions, in this case the millions of homeowners who save thousands of dollars a year that they are not paying to the Internal Revenue Service. According to a new analysis by Jed Kolko, chief economist for the real estate information site Trulia.com, among those taxpayers who itemize on their federal returns, 49% of total write-offs are housing-related — primarily mortgage interest and local property taxes. For homeowners as a group, this is a big deal.
But since only about one-third of taxpayers itemize on their returns — the rest opt for the standard deductions — who’s really getting these tax savings? As you might guess, people who have higher incomes are more likely to itemize and claim mortgage interest and other housing deductions. Citing the latest data on the subject, published by the IRS in 2009, Kolko found that only 15% of households with incomes below $50,000 took itemized deductions, while 65% of those with incomes between $50,000 and $200,000 did. Just about everybody with incomes above $200,000 — 96% — itemized on their returns.
Wouldn't you be embarrassed to overpay by $100,000? Only fools buy houses without knowing neighborhood values. Don't be a fool. Don't suffer the pain of an underwater mortgage. The surest way to lose your house is to overpay for it. Our reports identify overvalued and undervalued neighborhoods. Use it to broaden or narrow your search area. Savvy buyers work with us to find bargains. We've saved thousands from financial ruin. Let us save you too. If you want peace of mind while shopping for your next home, sign up for our monthly market newsletter.
We're sorry, but it seems that we're having some problems loading MLS # S715889 from our database. Please check back soon.
Proprietary OC Housing News home purchase analysis
$639,900 …….. Asking Price
$680,000 ………. Purchase Price
4/21/2005 ………. Purchase Date
($40,100) ………. Gross Gain (Loss)
($54,400) ………… Commissions and Costs at 8%
($94,500) ………. Net Gain (Loss)
-5.9% ………. Gross Percent Change
-13.9% ………. Net Percent Change
-0.8% ………… Annual Appreciation
Cost of Home Ownership
$639,900 …….. Asking Price
$127,980 ………… 20% Down Conventional
3.50% …………. Mortgage Interest Rate
30 ……………… Number of Years
$511,920 …….. Mortgage
$116,644 ………. Income Requirement
$2,299 ………… Monthly Mortgage Payment
$555 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$160 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
$3,013 ………. Monthly Cash Outlays
($358) ………. Tax Savings
($806) ………. Equity Hidden in Payment
$142 ………….. Lost Income to Down Payment
$180 ………….. Maintenance and Replacement Reserves
$2,171 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$7,899 ………… Furnishing and Move In at 1% + $1,500
$7,899 ………… Closing Costs at 1% + $1,500
$5,119 ………… Interest Points
$127,980 ………… Down Payment
$148,897 ………. Total Cash Costs
$33,200 ………. Emergency Cash Reserves
$182,097 ………. Total Savings Needed
The property above is available for sale on the MLS.Contact us for a comparative market analysis, a cost of ownership analysis, or information on how you can make an offer today!
Cost of Ownership AnalysisAre you ready to make an offer, but you are worried the cost of ownership is really more than you can afford? Don't make a mistake that might cost you the family home, your life savings, and your good credit! Get the advice of a seasoned professional. Contact us at email@example.com today! We produce detailed reports showing the cost of ownership based on the most likely transaction price and current financing terms. You will know how much you will spend each month in out-of-pocket expenditures and the true monthly cost of ownership factoring in tax deductions, loan amortization, and opportunity costs on your down payment. In addition, we show you how this cost compares to a rental of equal quality to make sure buying is the right decision for your situation. An OC Housing News Cost of Ownership Analysis will calm your worries and give you peace-of-mind. Let us show you the way! Reports are available for properties in the Southern California MLS coverage area, and are generally delivered within 24-72 hours. If you wish to receive multiple properties, please contact us at firstname.lastname@example.org, and we will prepare the reports for you.
OC Housing News FREE Guides!
Nearby ForeclosuresGain a competitive advantage over other buyers. By locating distressed properties -- before they hit the MLS -- you can discover where tomorrow's REOs and short sales will appear. Most of these properties are not listed on the MLS, but they will be soon. Research properties in advance and get a jump on your competition. Don't miss out on another deal because you couldn't act quickly. Use this tool to your advantage! The red properties are already bank owned. As soon as REO asset managers prepare them for sale, they will be on the MLS. Get ready! The green and blue properties have owners who are not paying their mortgages. They may be offered as short sales, or they may go through foreclosure and become REO. Either way, they will also likely be available on the MLS soon. Find your next home! Be prepared to offer on these properties by researching them in advance or risk losing out to buyers who are have done their homework. Start your research today! To find distressed properties, enter your desired location and press search. Scroll through list by pressing "next."
Comparative Market AnalysisAre you ready to make an offer, but you are worried you will either (1) underbid and miss the property or (2) overbid and pay too much? Don't make a mistake and miss your dream home, or worse yet, overpay for it! Get the advice of a seasoned professional. Contact us at email@example.com today! Are you thinking about selling, but you are worried you will either (1) overprice and fail to sell or (2) underprice and leave money at the negotiating table? We are the experts in real estate valuation. Work with us to set the right prices to sell your property quickly for the largest amount possible. Let us show you what your property is worth today! An OC Housing News Comparative Market Analysis will calm your worries and give you peace-of-mind. See for yourself right now! Reports are available for properties in the Southern California MLS coverage area, and are generally delivered within 24-72 hours. If you wish to receive multiple properties, please contact us at firstname.lastname@example.org, and we will prepare the reports for you.