As tax season approaches quickly, NAR President Ron Phipps speaks on the tax benefits enjoyed by homeowners.
“Owning a home offers myriad benefits throughout the year, but some of the financial advantages of home ownership are most apparent at tax time,” says Phipps, broker-president of Phipps Realty in Warwick, R.I. “As many of today’s hard-working American families are feeling a financial squeeze, the tax benefits that can come from owning a home can be a welcome relief.”
A number of tax deductions and credits are still available for homeowners; these include deductions – with specific limits – for mortgage interest and capital gains on home sales, and credits for certain energy-efficient home improvements. Even with these benefits, home owners pay 80-90 percent of all U.S. federal income taxes.
“It’s been suggested that many of today’s tax incentives for home ownership primarily benefit wealthy individuals, but that’s simply not true,” says Phipps. “As today’s public debate continues about what homeownership means for families, communities, and the nation’s economy, there’s no question that for many, owning a home is still the best way to begin building wealth.”
Ninety-one percent of home owners who claim the mortgage interest deduction earn less than $200,000 a year, and the ability to deduct the interest paid on a mortgage can mean significant savings at tax time. For example, a family who bought a home in 2010 with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file this year.
“Realtors see the very real positive impact of home ownership every day with our clients,” says Phipps. “Recent proposals to reduce or eliminate the mortgage interest deduction and remove government support of the housing finance market could have disastrous consequences for the economy, not to mention making it harder or nearly impossible for millions of families to own their own homes. We believe America must continue to invest in home ownership, for the future of our families and our nation.”