Should the Mortgage Interest Deduction be eliminated?

There is a lot of talk on Capitol Hill about eliminating the Mortgage Interest Deduction (MID). The federal government is facing a huge gap between the money they take in versus what they spend. I know there is a ton of waste going on in the government but that is a discussion for later. The fact is, law makers are looking to get more money from us tax payers and just about every tax deduction is on the table for elimination or overhaul. According to CNN Money, MID is costing  the government $573 BILLION in tax revenue from 2009-2013. Can’t you see them rubbing their hands together, with an evil laugh and drooling when they see that number?

Looking further into what the MID includes, I think there are some things that can be done to the MID without eliminating it completely.  Did you know a second home’s mortgage interest can be deducted? According to the IRS, a second home is considered a second residence and not an investment property. If you have a second home you are probably making enough money to lose that the tax deduction on the second home. Did you know that a yacht qualifies as a second home? Me neither. I get that some people choose to live on a boat and it actually sounds kind of cool. What I don’t get is that you can claim that yacht as your second residence and get a tax break on the mortgage interest.  Come on now! I don’t think eliminating the yacht interest write off from the tax code is going to have much effect on the rich or super rich buying a yacht. They all still want to be on their boat feeling like Captain Jack Sparrow or screaming “I’m the king of the world” from the front of it. Well, at least that’s what I would do.

I don’t see how the elimination of the MID helps the home owners or the already fragile Real Estate market. I am sure there are other things that can be done to modify the MID in the tax code (the National Association of Realtors is 100% against changing any of it) but I think a complete elimination of the MID is a bad idea. There are many homeowners that are still making payments on homes that are worth 50% of what they owe because the tax deduction makes it worth it for them. Would you still pay on your upside down mortgage if can’t use the deduction?  If you are in the market to buy your first home, would you still want to buy if there was no more MID?

 

First Look: Inside the $75 Billion Plan to Save Housing

A look at the number of trial loan modifications that have succeeded since the government launched its program last June, with CNBC’s Diana Olick.

Interactive Map – Foreclosure Rates, Unemployment Rates & Median Income

Here’s a great tool published by NPR! It’s an interactive map that tracks national August 2009 Foreclosure Rates, Unemployment Rates & Median Household Income statistics. Click here for the link.

Great News for Buyers!

Housing statistics are just out for 2nd Quarter 2009 and the verdict: while median home prices increased a slight percentage in some areas for the month of July, prices are still lower now than they were a year ago. In the Sacramento area, we saw a year over decrease of -22%. And prices have begun to stabilize in our area for the time being. For more on the article, see: http://bit.ly/WaWP5.