Author Topic: Not many claim home loan deduction though it confronts axe  (Read 1295 times)

Offline Juliana_27

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Not many claim home loan deduction though it confronts axe
« on: December 12, 2012, 09:43:00 PM »
The federal government goes to the great time and trouble to offer a mortgage deduction, or rather interest deduction, so homeowners can deduct the interest they pay on their home loan. However, information from the IRS shows that few individuals really claim the deduction. It may not exist forever as the deduction could be a victim of the “fiscal cliff” sessions.



Staying away from deductions for everyone



The White House thinks that taxing the wealthy more will solve all spending budget difficulties, but the House of Representatives disagree. It wants to see broad spending cuts to help keep away from troubles. The White House and Congress have been known to fight, specifically over the last few years. The “fiscal cliff” is nearing, and something must be done.



One thing which might face the chopping block, according to the Washington Post, is the home loan deduction, or more accurately, the mortgage interest deduction, which allows property owners to deduct interest paid on their mortgages on their yearly income tax filings, so long as the mortgage principle is less than $1 million per year. Second homes and home equity loans of up to $100,000 are also eligible.



The federal government pays $100 billion a year for the program.



Not used anyway



According to USA Today, about 50 million households are paying on a mortgage, but about 25 percent of working class individuals are actually claiming the deduction. Apparently people are not actually enthusiastic about the deduction, which is fairly surprising.



The share of the population that claims the deduction varies by state; 37 percent of homeowners in Maryland were claiming the credit, whereas 15 percent of West Virginians and North Dakotans claim the credit. The credit is more beneficial in states such as California, Washington state, Hawaii, Virginia and Maryland, where the credit can exceed the standard deduction.



California in particular is known for ridiculously high costs of housing, though only 25 percent of Californians.



About half of the deductions came from people making about $100,000 a year. About 8 percent were in households making less than $50,000 a year. It seems that those in the middle to upper middle class claim the credit most often.



Number of plans



Even though nobody claims the deduction, apparently many people decide to buy a house specifically because they can get the home loan deduction, according to USA Today. There are not enough benefits over standard deductions for some people, which mean it is not worth claiming.



According to the Washington Post, the credit existed since 1913 in many different kinds of forms. There have been many suggestions of how you can take care of it. Mitt Romney suggested cutting the amount that can be deducted while President Obama thinks it is a good idea to cut the amount that can be claimed by people in top tax brackets, according to the Wall Street Journal. There are other suggests such as limiting or getting rid of deductions on second homes or lowering the overall allowed deduction limit.




 

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