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Might We Say ‘Goodbye’ to the Mortgage Interest Deduction?

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mortgage-interest-deduction-eliminated-tax-cutsUp until now, the elimination of the mortgage interest deduction has been considered off limits when discussing tax reforms. The third rail, don’t touch it, but that has changed. Elimination is a real possibility now on the table.

In fact, according to Gary Cohn, National Economic Council Director, almost everything, including the mortgage interest deduction, is in play when it comes to tax reform. This despite promises made during his campaign by President Trump to leave it alone.

Republicans need to come up with ways to pay for their tax reforms and eliminating this deduction, along with the deduction for state and local real estate taxes, could do the trick.

Needless to say, the Realtor community is up in arms, and they are a powerful lobby. The battle lines are drawn.

The key could be in the proposed doubling of the standard deductions. In doing so, for most, he mortgage and state and local real estate deductions would be meaningless.

 

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Such deductions would only benefit the very wealthy, who would still itemize (and we know, no one cares about them).

  • Could it be that the mortgage interest deduction has outlived its usefulness?
  • Will people still buy homes if they can no longer deduct the related mortgage interest and taxes?
  • Might the increased standard deduction leave consumers with more disposable income to use to buy homes?
  • Are the mortgage and tax deductions still the main motivator for buying a home?
  • What effects will elimination of these deductions have on housing, Realtors, Builders and mortgage lenders?

If you step back and look at it, elimination of these long standing deductions may have minimal effect on the housing markets.

People will still buy homes at all levels because they want to own their piece of the rock. They want to become part of a community providing them a stable environment to raise a family, with the added benefit of a long term investment they can use and enjoy while earning equity.

Many already do it today knowing they don’t itemize to take advantage of these deductions. They don’t make enough money to do so, but they buy anyway.

Personally, I’m a fan of these deductions. I believe they do motivate some to buy instead of rent. But, then again, people tell me I’m a little old fashion. Maybe…

How about we settle the issue once and for all and go to a flat tax?

Michael Vitali

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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Michael Vitali

About Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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