For those that own their own homes in Encinitas, the new year may bring cuts to or the elimination of the mortgage interest deduction, which could pose a great deal of stress to those with homes in Encinitas.
No doubt you are aware of the “fiscal cliff” and the debates currently being held in Washington between both parties to avoid falling off the aforementioned, metaphorical cliff. In an effort to reduce the federal deficit the discussions have revolved primarily on new taxes that can be implemented and deductions that can be removed. As the Republican party is staunchly against raising taxes, this may shift negotiations to the elimination of deductions.
One of the most costly deductions is the MID (mortgage interest deduction), which results in $83 billion each year in deductions for homeowners. With this deduction homeowners are able to deduct the amount of interest paid on their home loan in the given year from their taxable income. Inman News outlines the ways Congresss may cut the MID:
- Congress may reduce the amount of the specific deduction, effectively cutting the deduction in half to include homes valued at $500,000 or less instead of $1 million or less.
- Congress may eliminate the deduction altogether, though both the general public and the real estate industry would no doubt oppose this decision vigorously.
- Congress may place on overall cap on deductions at 28% for households earning more than $250,000 for example.
The removal of this deduction would primarily affect those earning betweeen $100,000 to $500,000 per year living in wealthy cities, meaning this will directly affect those with Encinitas homes.
If Congress removes this deduction your Encinitas Realtor will let you know, so keep checking back for new developments on this issue.