How Would Cutting Mortgage Tax Deduction Impact San Diego?
Tuesday, December 11, 2012
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As negotiations continue in Washington to avoid the cuts and tax increases known as the fiscal cliff, one idea is getting some serious attention.
Senator John McCain and other lawmakers are considering changing the mortgage tax deduction, a so-called "tax loophole."
"An estimated 40 million homeowners take advantage of the mortgage interest deduction, which lets you write off a percentage of the interest you pay monthly on your home loan," writes Marketplace. "For the average homeowner, that savings adds up to about $600 a year."
Democratic Congresswoman Susan Davis floated the idea on KPBS Midday Edition yesterday, saying "everything has to be on the table."
"It may be a portion of that," she said about the mortgage tax deduction. "Nothing that would impact people in a way that is so great, and it may be phased in, it may be for those that have the highest income."
Some say there's even some support to eliminate it completely. For homeowners in high-value home areas like San Diego, that possibility is causing concern.
Appaswamy "Vino" Pajanor, the executive director of the Housing Opportunities Collaborative, told KPBS San Diego's homeowners will face the issue of "what am I going to do with my home that's underwater?"
"They are sitting on the edge, trying to calculate, do I stick to this home, do I make the payments on time, or do I walk away?" he said. "And homeowners could decide, if the mortgage tax interest deduction is gone, I'm going to walk away."
He said tinkering with the tax deduction homeowners get for mortgage interest may have a ripple effect throughout the real estate and construction industries.
"Home buyers may be looking at the market and saying, why would I own a home when I could rent it and pay almost the same," he said.
Michael Lea, the president of San Diego State University's Corky McMillin School for Real Estate, said a complete elimination would significantly impact the middle class, but added that "the vast majority of the benefit of this goes to upper income people."
Claire Trageser contributed to this report.
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