Every year many Americans count on their homes mortgage to save them on their taxes. Mortgage tax deduction is one of the largest tax deductions we have and over the past two months Congress has started talking about whether or not it should be eliminated or reformed.
Today this deduction allows Americans to deduct up to $1 million of debt that has been used for buying or remodeling a home. You can also apply this credit on up to $100,000 of home equity debt. I can’t tell you how much I love being able to write that money off of my taxable income each spring.
Close to 67% off Americans own a home in the United States which means that this will affect everyone from middle class to the uber-rich. How much does this affect you on average?
In 2010, for people in the household income range of $50,000 to $75,000, the average deduction was $10,000 which would come out to a savings of $2,500 per year. For families in the $75,000 to $100,000 income range the average deduction was $11,000 which would be a savings of around $2,800. Lastly those who families that earned between $100,000 and $200,000 had an average deduction of around $14,000 which would be a savings of $3,500.
Let’s keep in mind that these numbers are tiny compared to the 236,000 american families earning over $1 Million in 2009. Most of these household own houses much more expensive and would receive quite a bit more in return. Is this really fair?
What I would like to see is a cap be put on the top portion of American families. This would allow middle class america to still be able to receives these wonderful tax breaks.
I also want to quickly hit on something else that would take a hit if they decided to eliminate the tax credit all together. That is the housing market. Yes I know you’re are saying to yourself the housing market has already been hit hard. This is true but if they eliminate the tax credit you will almost certainly see people running for the doors to sell or walk away from their homes. They would have just lost the biggest incentive to be a home owner right now.
What are your thoughts on this issue?
Latest posts by Sean Bryant (see all)
- Wealthfront Review: Get Started Investing For Free - January 9, 2017
- After Holiday Online Sale Shoppers Beware: Fake Apps and Scams Are Out There - January 4, 2017
- 3 New Financial Resolutions for the New Year - January 2, 2017