Possible Lower Ceiling On Mortgage Deduction
The Merc is reporting on the possibility of lowering of the amount of interest a homeowner can deduct on a mortgage. Currently, you can deduct the interest on the first $1.1 million of your mortgage. The proposal is to lower that limit to $312.895. In most of the country, this isn’t of much concern as the median home price in the U.S. is $208,300 as reported by Money Magazine. However, in Silicon Valley the median home price is $705,000. Even with 50% down, your above the proposed cap!
I’m not an economist, so I don’t know what the exact effects will be. My guess is that housing prices around here drop pretty significantly. As for how low, and what other ripples might occur (exodus from the state, companies moving), that I don’t know.
Another deduction that might go away and affects everyone is the deductibility of state and local taxes. If you’ve ever done your taxes, you know that you get to deduct the state and local taxes you paid from your federal taxes. Why all these proposals? To simplify the tax code of course. Yes changing a ceiling from $1.1 mil to $313K is a lot simpler. And having less deductions simplifies things too! They really should just eliminate the mortgage deduction all together if their goal was to simplify things. I have an idea why don’t they have fewer federal programs and a smaller Federal Government, that would simplify things a lot more than these changes.
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