ALBANY -- Congress may eliminate or reduce the mortgage interest deduction for taxpayers as the country nears the “fiscal cliff”.
Many homeowners deduct the interest paid on their mortgage from their tax bill and it has been a benefit that gives an edge to buying rather than renting.
“I know for a fact, being in real estate ten years, that every year people look for that write off because it gives them money back during income tax season,” said Anthony Gucciardo, President of the Gucciardo Group.
Realtors aren’t alone in opposing the elimination. The mortgage industry is also keeping a close eye on the discussion.
Some are hoping Congress and President Obama will compromise by limiting deductions to homes worth less than $500,000. Currently it applies to homes worth less than $1 million.
“Hopefully that's the worst case scenario. If they eliminate it completely, that I think could be devastating for the housing market,” said Drew Aiello, Senior Loan Originator with Homestead Funding Corporation.
“The segment of the housing market that I think could get hurt are the people that have homes and are looking to upgrade to a bigger home.”
Aiello added he would be surprised if the government completely eliminates the deduction because of many subsidies provided to homeowners in recent years.
“It's silly if they mess around with this because they are pumping so much money into the economy. They're buying so many mortgage backed securities to keep interest rates low and they're doing all these different programs that are out there to help the housing market and in one fell swoop they could just [give] a nice little punch in the stomach and all the good they've done could go away,” said Aiello. “If you put a nice blow to the housing market with this type of mortgage deduction that could be a big problem not just for the housing market, but for all the ancillary businesses that are out there.”
It’s possible even if the deduction is eliminated it may not impact the housing market immediately because interest rates remain low, but as rates increase it could hurt the housing recovery.
“Right now, one godsend that we have is that rates are so ridiculously low with or without a mortgage deduction, it's an amazing time to buy a house,” said Aiello. “As rates go up and there's more and more interest that people pay, then I believe it becomes a serious consideration versus renting.”
Realtor Gucciardo predicted a more immediate impact may be felt in the Capital Region as fewer people look to buy and home ownership becomes less attractive.
“Especially in upstate New York there’s a lot of middle class people,” said Gucciardo. “That extra two or three thousand dollars, or whatever it adds up to, is going to hurt people.”Congress may eliminate Mortgage Interest Deduction to avoid Fiscal Cliff