Monday, April 11, 2011

MORTGAGE INTEREST DEDUCTION = BIG TAX ADVANTAGE

By Alice Walker, President of the Greater Nashville Association of REALTORS®
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Contact her at 615.506-2425 or Alice@AliceBWalker.com

Today’s the day…the Ides of April. Like the Ides of March were a thorn in the side to Caesar, the Ides of April, aka Tax Day, is a thorn in the side to many Americans. If you anticipate a refund, likely you completed your taxes well before today. On the flip side, if a refund is not in your future or you’re an independent contractor like me with lots of tax paperwork, April 15 looms at you (even though it is really April 18 this year). Thankfully, there are tax deductions which make filing annual taxes a little less painful for many of us.

Probably the most significant tax deduction to most Americans is the Mortgage Interest Deduction (MID). It has been instrumental in helping many individuals and families be able to take their first step into home ownership. Since the MID was initiated in 1913, our country has seen countless recessions, and even the Great Depression. Yet, the MID has remained intact.

Unfortunately, however, even in light of how effective the MID has been in helping build strong families and communities, the current Washington Administration is considering reducing or significantly changing it. My hope is that you will let those who represent us in Washington know that is not acceptable. Sixty-seven percent of American households are owner-occupied, making America a country of home owners. Those home owners pay 80 to 90 percent of federal income taxes collected, which fund federal programs for all Americans.

Generally speaking, a family that purchased a $200,000 home last year could save about $3,500 in taxes on their return this year. What would you do with $3,500 of tax savings? Could you use that money for savings or retirement or you pay down other debts or student loans? Could it be put away for your children’s education or to make home improvements which could add even more equity in your home?

If you aren’t currently a home owner, imagine how different your annual taxes might have looked if you were eligible to claim the MID. If you are a homeowner, think for a minute what your filing would look like without the MID. In both of the scenarios listed, the ability to deduct the interest you pay on a mortgage could drastically alter your federal taxes.

While only thirty percent of all taxpayers in any given year itemize their deductions, more than three-fourths of home owners utilize the MID. In 2008, it saved home owners $100 billion in taxes – allowing those funds to be used for productive personal or family choices. It is a crucial component to home ownership and our nation’s economy. If you’re unsure of the effect the mortgage interest deduction has or could have on you, contact one of the many knowledgeable REALTORS® in Middle Tennessee. We are equipped with facts, resources and even a cool new MID Calc app for our Smartphones which we can use to show you the impact of the MID.

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