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Lawmakers Hint Mortgage Interest Tax Deduction Could Be On The Chopping Block

12-07-2012About MortgagesEddie Knoell

We’ve heard for years now the term ‘fiscal cliff’ and while the leaders in Washington battle to steer us away from that edge, a home loan in Arizona, as well as everywhere else, could be directly impacted by the decisions they make in D.C. There hasn’t been a major overhaul of tax codes in this country in decades, but with the economic crisis growing worse each year, it appears that homeowners who have been struggling since 2008 could be in for more rough seas ahead.

This doesn’t mean that Arizona mortgage rates are going to be affected in any way, shape, or form. Even if Washington decides to eliminate completed the interest tax deduction that homeowners can take on their tax returns, it won’t do anything to move the needle on Arizona mortgage rates. It will mean, though, that no matter where you have a mortgage and no matter with whom you have that loan, where you could have deducted a portion of your interest payments on your taxes, you won’t be able to do that any longer.

Of course, this would seem to hit the struggling middle class especially hard during a time when the housing market appears to be moving in the right direction. Without these interest tax deductions, you could end up paying more annually for your home.

What is an Interest Tax Deduction?

If you have never owned a home, but you’re in the market for a home loan in Arizona, it’s important to understand what an interest tax deduction is. Basically, the money that you pay toward interest on a mortgage can (at the time of this writing) still be deducted from your tax liabilities. If you paid $5,000 in interest during the year, for example, you would be able to write off a portion of this interest, lowering your tax liability and taxable income rate.

Depending on the cost of your home and the interest rate that you pay, this can be a considerable savings. However, if this aspect of the tax code is removed or altered, it will ultimately raise the amount of money you pay annually for your home.

This may sound confusing, but it’s important to understand because the fiasco that is taking place in Washington, D.C., despite the calls for just taxing the rich, is likely going to affect everyone, including new and existing homeowners.

Don’t let this discourage you from applying for a home loan in Arizona. The real estate market in Maricopa County is beginning to move in the right direction and with home prices at the lowest point you’re likely to see, there has never been a better time to buy a home here. Mortgage holders with high loan amounts will tend to be hit more if this tax revision goes into effect, but if you plan your budget each year carefully, you’ll be fine.

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Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.