The mortgage interest rate tax deduction permits homeowners to take away their mortgage interest rate payments. This fresh congressional darling was considered to be safe. However, the latest chatter from the president and members of congress suggest that elimination and reduction is now back in the negotiation phase.
According to the estimates, the government will have to face cost reaching as much as $131 billion this year alone. The policy gives homeowners the power to disregard the interest acquired on their mortgage. According to reports, a homeowner can get a tax deduction of as much as $1 million.
According to experts, the fact that this deduction is highly considered to cut out budget is a sign that politicians are open for earnest negotiations. Both Republicans and Democrats value this deduction so much that its elimination is dubbed as the political version of Abraham surrendering Isaac to the hands of God.
On the other hand, this interest deduction has a profound psychological impact towards homebuyers who perhaps think that all their payments will be paid off in the tax deductions to come. For many real estate agents, mortgage debt deduction is a big factor that buyers consider in purchasing a property.
However, only few people take advantage of this deduction given that it is considered as a subtraction made only for the rich. The fact that only primary and secondary homes and even boats that are expensive enough are covered says a lot about this policy. In fact, tax deduction that cost as much as $1 million is more than the mortgages and interest payments of many American citizens.
In most cases, middle class buyers do not even consider itemizing their tax deductions. This is why even if they are qualified to save certain amounts for their interest rate they do not process the necessary papers. On the other hand, people who can hire lawyers to do the itemizing for them are more updated and savvier when it comes to their taxes.
Currently, the interest rates are as low as 3% that deduction is not as large as expected. However, the deduction could have been more useful when the rates go up. As mentioned earlier, the deduction is well loved that it is difficult to believe that it can be ultimately eliminated.
As for regular Americans, any means of saving money could have been a welcome policy especially with how the economy has gone consistently inconsistent.