Monday, May 6, 2013
Congress Wants To Eliminate The Low Income Housing Tax Credit
The U.S. Government Sequestration program wasn't bad enough by cutting government funding of programs affecting low-income families, children, the elderly and the disabled. There is now the possibility that Congress could severely hurt The American Dream by eliminating the mortgage interest tax deduction for homeowners.
The American Dream of home ownership offers not only the benefit of owning your own home but also housing incentives that include the Low Income Housing Tax Credit. This consists of the mortgage interest deduction and real estate tax deductions. These are additional benefits to people who own their homes and itemize these deductions on their annual taxes. Generally, utilizing these deductions results in higher deductions than just taking the standard deduction. The more deductions you can claim, the lower the taxes you will pay. More than 70 percent of home owners take advantage of these deductions.
However, this program may be on the chopping block along with so many other programs that have been cut due to government sequestration. If it happens, who will be affected the most? Basically everyone, starting with the 40 million tax-paying home owners.
According to the National Association of Realtors (NAR), it “could endanger property values.” Some economists predict that in some instances home values could drop in the double digits. Others predict that it could have a ripple effect throughout the real estate and construction industries.
Builders will also be affected. The tax incentive encourages more people to buy homes. Taking that incentive away will not only affect home buyers but also the people in business to build homes. Small businesses in particular will suffer because they supply the bulk of business that supports home building. The housing industry also creates jobs and increases economic growth.
With interest rates historically low, it should be an ideal time for people to buy their own home. With legislation looming on the horizon that could end up lowering home values, would-be home buyers may hold back rather than invest in a home that could end up losing value rather than building up a nice nest egg for retirement. You can be sure that millions of Americans will be watching to see what Congress does in the coming months. Their action will determine the fate of an industry that is a key play in the U.S. economy.