If you are considering purchasing a second home, you should know that at least 1 presidential candidate is considering dumping the mortgage tax deduction on second homes.
This doesn’t affect most people. Most Americans are struggling to keep the one home they have, so why are people even discussing what happens with second, third and fourth homes? Well it’s simple, we are running on a massive government deficit. This means the government is spending more than it brings in by more than 1 TRILLION DOLLARS. While this is certainly not the end of the world, it’s a huge deal and impacts every American.
Knowing this, every presidential candidate will have to present their plan to “balance the budget.” Looking through the spending lines, the second largest tax expenditure is the mortgage interest deduction line. For 2012, that figure is estimated to be $131 Billion. If a candidate can cut that amount, it’s certainly a start. Mitt Romney, the most likely of Republican Candidates to run against incumbent President Barack Obama in November, is suggesting cutting the mortgage tax deduction on second homes.
I view this as a way to actually increase the amount of taxes paid by the wealthiest Americans. Warren Buffet has been suggesting for years that the wealthy do not pay enough taxes. Perhaps this is Mitt Romney’s way of agreeing? As long as he doesn’t create additional tax loop holes for the same people as a way to offset this change, I think its a great plan that all candidates should consider, regardless of political affiliation.
It’s estimated that Romney’s plan would save the Federal Government $10 Billion per year. That obviously doesn’t get the job done, but it’s a nice start. The mortgage tax deduction is supposed to be an incentive for people to buy homes and reduce the cost of homeownership. However, for those who own multiple houses, this is not an incentive, it’s an added benefit. These wealthy individuals will still buy their second and third homes, only now, they cannot deduct the mortgage interest on their taxes.
The plan keeps the incentive for the majority of Americans who feel lucky to own one home. This is the true goal of the mortgage tax deduction anyways.
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