“Housing and real estate account for almost 1/5th of Maryland’s gross state product,” said Mary C. Antoun, Chief Executive Officer of the Maryland Association of Realtors.
“Traditionally, the housing sector leads the economy out of recession and into more robust growth, but that can’t happen if we keep putting hurdles in its way.”
Recently, a huge hurdle was proposed in the state of Maryland. Governor Martin O’Malley announced a plan to reduce the mortgage interest deduction (MID) for many Maryland homeowners.
As it is now, a homeowner can deduct the interest payments on their primary dwelling as well as one other dwelling as long as there is a combinational total loan amount of $1 million. Additionally, interest from a home equity loan or a line of credit up to $100,000 per year is deductible, too.
Earlier this year, USA Today studied tax returns and the correlating percentages of tax payers opting for itemized deductions that would benefit from the proposed MID decisions.
The USA Today study found that only 26% of all tax payers benefited from the MID in 2010. Statistics show that the range went from a low of 15% in North Dakota to a high of 37% in Maryland. Maryland homeowners had benefited the most from MID.
The table below shows percentages of tax filers in each state that benefited from the MID. Overall, as mentioned above, only 26% of the United States population benefited from 2010’s mortgage interest deduction.
What does this mean for homeowners?
Since 1913, laws and codes have protected mortgage interest deductibility. Since Governor O’Malley has proposed a reduction of the MID for all Maryland homeowners, many may risk losing some of their mortgage value as well as state and local property taxes.
“Everyone is well aware of the burdens Maryland homeowners are facing. Many homeowners have watches the value of their homes decrease. One fifth of Maryland homeowners are currently underwater, and now homeowners find the one constant reliable tax benefit to owning a home under attack,” said Antoun in a press release from the State of Maryland earlier this month.
If the MID is compromised, home values will sink substantially in the upcoming years.
Based on individual homeowner earnings, those in select income brackets may see slight bill increases (for those who make less than $40,000 annually). Those in higher earning homes ($125,000 or more annually) would lose tax savings because of the MID.
What does this mean for realtors?
According to research conducted by the National Association of Realtors, eliminating the MID would cause a 15% decline in the value of homes across the nation. In areas with high costs of living and expensive housing markets, that impact would be greater. In lower cost areas, the effect would be more modest.
In order to achieve lower rates, congress may need to limit or repeal widely-utilized deductions. This would include the MID. The loss of the deduction could reduce the value of homes and impact or significantly hurt the already traumatized housing recovery.
Would you like more information?
Write to us at info@shorebread.com and we’ll put you in contact with a representative from the Costal Association of Realtors of MD.
Featured photo by Craig Lynch.
