Magazine article Insight on the News

Facing off on Write-Offs

Magazine article Insight on the News

Facing off on Write-Offs

Article excerpt

Realtors, home-owner associations and builders are in a tizzy that Congress may reconsider the mortgage-interest tax write-off for home owners. While there is no proposal on the table, Senate Finance Committee Chairman Bob Packwood has talked publicly about the possibility of limiting deductions on mortgages up to $250,000. Currently, home owners are permitted to deduct interest on loans up to $1 million.

The Oregon Republican has interviewed industry and finance experts to determine the ramifications of such legislation. He also has heard testimony on numerous proposals to revise the federal tax code in favor of a flat tax. In at least one such scenario, virtually all deductions would be eliminated, including the credit for mortgage interest.

"For a buyer, the ability to deduct mortgage interest gives you more after-tax dollars to spend on housing and it makes housing more affordable," says Steve Driesler, senior vice president of government affairs at the National Association of Realtors. "It makes you able to qualify for a larger loan and buy a larger house, and it gives you more money in your paycheck after taxes to meet your housing needs. From a property owner's point of view, there is a certain tax value already built into the price you paid for the house.... Independent research says that [mortgage interest and state deductability] equal about 15 percent of the value of your home."

Driesler says there is no question that the cost of owning a home would increase without the deductions. "You'd have less money to spend after taxes, which makes owning the home go up fairly significantly, especially if you have a high mortgage." According to the Congressional Budget Office, taxpayers claimed an average of $7,300 in mortgage-interest deductions on their 1994 tax returns.

Officials from the United Homeowners Association, or UHA, a nonprofit group based in Washington, view the possible tax changes as an assault on the few remaining perks associated with owning a home, and officials are attempting to mobilize their 65,000 members. "We're going to be utilizing on-line services, which include America Online and the Internet, to get the message out to mainstream America that these attempts [at limiting the mortgage-interest deduction] are hurting your chances of [realizing] the American dream," says Albert Clark, UHA vice president.

Herb Spira, tax counsel for the Independent Bankers Association of America, says he is concerned about limits on the mortgage-interest deduction because it would hurt community banks, which get most of their business from financing mortgages. …

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