The Daily Star, Oneonta, NY - otsego county news, delaware county news, oneonta news, oneonta sports

December 4, 2012

Area brokers: Keep mortgage deduction

By Richard Whitby
The Daily Star

---- — Real estate brokers in Otsego and Delaware counties agreed Monday that elimination of the mortgage interest deduction on federal income tax returns – an option being discussed during “fiscal cliff” negotiations in Washington, according to published reports – could be a drag on the housing market.

“It would be a very serious blow, I believe, not just in Otsego County, but nationally,” said Barbara Roberts of Prudential Fox Properties in Oneonta.

On the revenue side of the negotiations, President Barack Obama is pushing for higher tax rates on the rich, while Republicans are arguing that the government can increase its revenue by eliminating loopholes and deductions.

But doing away with the mortgage-interest deduction would be a step that even some Republicans would be reluctant to make. Stephanie Valle, a spokeswoman for Rep. Chris Gibson, R-Kinderhook, said Gibson was one of them.

“Congressman Gibson has been and continues to be supportive of the mortgage-interest deduction,” she said in an emailed response to questions about the deduction. “In Congress, he believes there is bipartisan recognition that this deduction is important and should be continued.”

The deduction has been part of the U.S. tax code since the Tax Reform Act of 1986. Prior to that, all interest had been deductible since the 16th amendment to the Constitution was ratified in 1913. That made income tax a permanent fixture or the government’s revenue stream.

The 1986 overhaul preserved the mortgage-interest deduction because it served as an incentive to home ownership.

The deduction is “a motivation for people to buy a house, because there are so few deductions left,” Roberts said. “I think that it would certainly impact ... the price point at which people would buy, if they did buy, and it would probably drive more people to rent rather than own.”

Becky Thomas of Benson Realty in Oneonta agreed with the idea that the deduction provides an incentive.

“If that weren’t to be there anymore, certainly it wouldn’t be as … enticing, for people” to buy a home, she said. “Am I saying that no one would purchase a home? No, I’m not saying that. But it certainly would be a negative.”

But others weren’t less certain about the possible effects of eliminating the longstanding deduction.

“I’m not certain that it’s going to impact price in any way,” said Eric Hill, an associate broker at Don Olin Realty in Cooperstown.

“The initial six months could show some negative reactions, particularly if there is a rise in the interest rates, which we all have been waiting for for the last couple of years,” he said. “If that transpires and parallels the elimination of the deduction, there will be a quiet period of adjustment.”

Roberts said she thought some homeowners might escape much of the burden.

“Many people in the lower price ranges don’t itemize their deductions,” she said. “They just take the standard deduction. So those folks, it’s not going to impact at all.

“And it probably won’t impact the very, very high mortgage amounts. … What will happen there, the wealthy, rather than take out a mortgage to mitigate their taxes, will just pay cash. So, it’s going to impact the middle and the upper middle class.”

Thomas, on the other hand, thought the effects of such a move would be felt “right across the board.”

She also said other market factors might help offset the loss of the mortgage-interest deduction.

“Interest rates are at historic lows,” she said. “That entices people to buy. … So, we’re actually seeing a pretty good market for this time of year. I think everyone would agree that it’s been really steady for us this year, and the market is certainly picking up a little bit.”

The prospects for action to eliminate the deduction were unclear Monday. Recent reports have indicated that Congress was more likely to cap the deduction.

“My personal feeling is that it’s not going to happen,” Roberts said of eliminating the deduction.

“I think they’ll do something that will cap overall deductions, cap mortgage deductions, as oppose to eliminating it entirely. That would really surprise me if it happened.”