Last week, President Obama finally addressed the issue of mortgage interest deductions since the United States is getting so close to going over the “fiscal cliff” that everyone has been talking about lately.
During a Twitter town hall meeting President Obama stated that he supported the mortgage interest deduction continuing for the middle class but he also said that the only way middle class deductions would be able to continue was if tax rates for top income earners went up.
How Would Tax Deductions Affect Families?
Under the President’s proposal any household that currently pays income taxes up to 35% would be held to only being able to claim just 28% of their tax rate. What does this mean in real dollars? A family who claims $1,000 on their income tax deductions would only be able to see a real tax savings of just $280 compared to enjoying a tax savings of $350.
Many political insiders also speculate that the President’s plan will limit the amount of deductions that people can take on second homes including any deductions or interest that someone may pay on a homes principal up to $500,000.
Cheers And Jeers
Reaction to changes in in mortgage interest deductions vary depending on who you ask; politicians support continuing mortgage interest deductions whole others regard it as a “sacred cow” that’s left over from previous, presidential administrations.
One person who doesn’t support continuing the deductions is Edward Kleinbard, a law professor from the University of Southern California, who regards mortgage interest deductions as extravagance that can no longer be continued especially since ending the deductions would bring in over $100 billion dollars per year and help end the governments fiscal problems.
To learn more about the mortgage interest deduction and how it’s end will affect the average Orange County homeowner, contact Fred Sed & Associates today at (949) 272-9125.