Today TaxMama® reads the Tax Prof Blog’s notes about who benefits from the mortgage deduction. According to an analysis reported in the NY Times, only 30% of Americans really benefit from this deduction. They are essentially in the “upper-middle and upper-income households.” Doesn’t that make you feel rich? What is the reality?
I want you to look at your own tax returns. Are you getting the full benefit of a mortgage interest deduction? Over the years, most of my clients have become homeowners over time. That mortgage interest deduction helped them buy a home worth about 30% more than they could otherwise have bought – due to the benefit from the deductions.
How about today? These days, you can get a mortgage loan (new or refinanced) with a rate of 5% or less. Based on the average home prices around the country, such a low rate barely even makes it possible for a couple to itemize anymore. Couples will have a standard deduction of $12,200 next year. Their 5% mortgage interest on $250,000 (forhomes in the West and Northwest) would be worth $12,500. At $150,000 (in the mid-west), the interest would only be $7,500.
It’s still a big help to single filers whose standard deduction will be $6,100.
Of course, with the mortgage interest as a base, you can add in property taxes, state income taxes, contributions and other expenses. Then, even couples end up with benefits from itemizing. Being able to start with the mortgage interest deduction, enables you to use another $5,000 or more worth of expenses over your standard deduction.
So who are they kidding?
Now does this make you feel particularly wealthy? Or are you still struggling to make ends meet?
I’m not quite ready to see it go – are you?
And remember, you can find answers to all kinds of questions about what tax benefits are really worth and other tax and business issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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