By Mark Hite
President, Greater Chattanooga REALTORS®
Federal Income tax reform is a hot topic in Washington right now and some elements being discussed may actually harm middle class homeowners, according to the National Association of Realtors.
The National Association of Realtors (NAR) issued a “call to action” this past week for its 1.3 million members to contact their Senators and Congressmen in Washington to encourage them to reform our tax code AND protect middle class homeowners.
Currently 83% of all federal income taxes are paid by American homeowners, NAR has pointed out, so major changes like removing the Mortgage Interest Tax deduction could be a major blow to these citizens. A home mortgage interest deduction allows taxpayers, who own their home to reduce their taxable income by the amount of interest which they pay to the mortgage company.
This tax deduction was first enacted in 1913 and has been a bedrock of the home ownership value proposition since its inception. NAR estimates that home-owning families with incomes from $50,000-$200,000 could face average tax hikes of $815 in the year after enactment.
Looking back in time to the 1986 Tax Reform Act, there were several changes that affected commercial real estate. NAR noted that after this was enacted, property values in the commercial sector dropped significantly. This drop not only affected owners, but also negatively impacted state and local tax revenue.
While American home owners have recouped the losses in value following the recent recession, analysts from the National Association of Realtors have calculated that these gains will once again be swept away if the mortgage interest tax deduction is removed. NAR suggests that Americans could see a drop of more than 10% in home values with these suggested changes.
Another item being discussed in Federal tax reform is the removal of state and local property taxes as a tax deduction. These incentives have proven critical for a strong housing market-which in terms creates jobs and builds stable communities. If this deduction is also removed, then these 2 items could serve as a 1-2 punch to American home owners.
For these reasons your local Greater Chattanooga Realtors along with Realtors across the state/nation are contacting legislators encouraging them not to turn our home-owning nation to a home-renting nation. Please join us in the important effort and for more information go to www.nar.realtor/tax/reform .