Right now, lawmakers are considering taking away a huge annual refund for homeowners — the mortgage-interest tax deduction.
Rick Mayers of Springfield says, over the years, he’s gotten used to the very generous refund.
“I mean it comes out to almost $10,000 a year,” says Mayers. “So you can subtract that.”
But the federal government is buried in debt — $16 trillion to be exact. Which means that offering such generous write offs may no longer be feasible.
“The mortgage-interest deduction is one of the most common deductions and saves people a lot of money,” says Robert Suprenant, the director of Special Tax Services at Moriarty & Primack. “The average savings can run anywhere from $3,000 per year to $10,000-$20,000 per year, depending on how high the mortgage is, how high the interest is, how high the costs are.”
If that were to disappear, Mayers — along with many other homeowners — would have to do a lot more budgeting.
“Yeah, I’d have to come up with the extra money somehow, probably work more house or something,” says Mayers.
There’s also the fear that in a housing market that’s just starting to recover, either reducing or completely eliminating mortgage deductions could stall home sales, once again.
“The effect on the housing market, what would happen to housing prices, the monies lost in the economy, the spending that would be taken out of the economy — if this deduction is lost — the trickle-down effect would just be devastating to the economy,” says Suprenant.
Of course, nothing is set in stone.
Other proposals include capping all tax deductions, or only allowing people people in lower tax brackets to apply for mortgage-interest deductions.
“I mean, everything is up for grabs right now, we’re talking about the people in Washington trying to come up with an agreement on something,” says Suprenant. “All we know is tax rates aren’t going to go down — tax rates are going to go up.”
Accountants are also advising everyone to take whatever income you can into 2012 and pay taxes on it this year — before the tax rate goes up.
More than 31 percent of tax-payers claim a mortgage interest deduction in Massachusetts. That’s one of the highest rates in the nation.