Home ownership tax incentives can no longer be taken for granted.
In May 2013, the House Ways and Means Committee heard testimonies from housing and policy experts who want to leave the mortgage interest rate deduction (MID), the real estate capital gains exemption and low income tax credit in place.
The tax incentive most at risk is the MID, which supporters such as Robert Dietz, assistant vice president of the National Association of Home Builders says was used by 70 percent of homeowners or 35 million taxpayers in 2009.
The MID is definitely an incentive that helps many homebuyers decide to purchase rather than rent a home. Between 1940 and today, home ownership has increased from 44 percent of households to 66 percent, due in part to the tax incentive.
Detractors say incentives shouldn't favor owners over renters and that it favors owners of more expensive, larger homes. They say homes would be less expensive without the tax deduction "built in." Supporters say homeowners help stabilize communities, as well as help households build wealth.
If it's going to make a difference, say some, the MID should be restructured to benefit low and middle-income taxpayers who are deciding whether to rent or own.
The elimination of the tax deduction would raise taxes on all households by nearly $700 per household. Or, if the MID is capped at $500,000 of mortgage debt, taxes rise by approximately $84 per household.
Federal tax incentive reform also ignores benefits at the city/county/state level. "The real estate tax deduction is an important reminder that home owners pay more than $300 billion in property taxes each year," said Dietz in testimony.
"Housing provides the momentum behind an economic recovery because home building and associated businesses employ such a wide range of workers. With the right policies in place, housing can be a key engine of job growth that this country needs," says Dietz.
In other words, changes to tax incentives reduces the cost of monthly house payments, primarily for younger homeowners who are raising families on starter and move-up incomes. And that's worth saving.
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