Maryland Mortgage Interest Tax Deduction At Risk

The mortgage interest tax deduction that 38% of Maryland homeowners take advantage of could go away if a new bill introduced is passed.

According to the Maryland Association of REALTORS(R) Action Alert about the reduction in tax deduction,

“Under the proposal, if a Maryland taxpayer’s federal adjusted gross income exceeds $100,000; single taxpayer’s itemized deductions would decrease by 10% when calculating Maryland taxable income – that’s an INCREASE in your Maryland taxable base! Taxpayers with adjusted gross income over $200,000 would see their deductions decrease by 20%!”

That is A LOT of money that 38% of Marylanders would lose!

20% of Maryland homes are already underwater, and this could bring values down further, as I talked about last January when the government wanted to remove the mortgage interest tax deduction across the US.

That bill was voted down, and now our state is trying it to reduce our deficit.

The Maryland Bill in discussion is Budget Reconciliation and Financing Act of 2012 (BRFA, HB 87/SB 152).

If you feel that the reduction in mortgage interest tax deductions could affect either you or your home’s value, this link should take you to the Action Center, where you can enter your information and email your upper & lower state chamber representatives.

I hope we can keep our Maryland real estate market on the upturn, rather than see it turn downward.

What Mortgage Interest Deduction Means For You

There is a big issue affecting many homeowners in discussions in Congress right now, and whether you personally take the Mortgage Interest Deduction or not, this could  be a big deal for your house value.

Why? Many Americans do take the mortgage interest deduction on their federal taxes each year. If you bought a house and put less than 20% downpayment, then it is likely you pay this insurance/interest.

Should the deduction be removed, it could affect many Americans — and NOT just those who take the deduction.

Often times, when homebuyers consider whether a house is truly affordable, they consider how a reduction in taxes may help. Property taxes, improvements, and for many, mortgage insurance. Even if you do not take this deduction, the removal of the deduction could possibly hurt your property value. How?

Let’s use the example of Mr. & Mrs. Homebuyer, would have gotten a tax reduction of $250/month from their mortgage interest. That $3,000/year could mean a certain house they’ve had their eye on is definitely affordable, knowing that $250 of their monthly payment would end up coming back to them when they file their taxes.

If that deduction goes away, that same house is possibly $250/month too high out of their price range. SO, the house may not be worth that higher price that it may have been when the tax deduction was still in place. A CNNMoney.com article quotes the National Association of REALTORS(R) President, Ron Phipps, as saying house values could drop as much as 15%.
NAR states in their video about the mortgage interest deduction that:

The vast majority of households that take the deduction are middle-income families, earning either less than $100,000 a year or between $100,000 and $200,000 a year (the typical cut-off point between wealthy and non-wealthy households).

If you see the possible detriment to your house value, then the best way to fight this is to contact your local congressional representative.

Here is the link to contact your Baltimore County Council.

For the Baltimore City Council, you can find your district, then contact your local Baltimore City council member.

The reason to help fight to keep the mortgage interest deduction in place is to hopefully retain your house’s value. In this distressed market as it is, this could make house values drop even more!

Do You Write Off Mortgage Insurance? You Can’t File 2010 Taxes Yet.

Not only is the mortgage insurance deduction in homeowners’ taxes creating an issue in Congress as the government struggles to balance the budget, if you are one of the many homeowners who DO take this deduction, you cannot file your 2010 taxes yet.

This is due to tax laws that were enacted at the end of 2010, so the IRS is not prepared for those changes yet. The IRS expects to have the ability to process those returns beginning sometime mid-to-late February, according to accountingtoday.com.

Also, according to the IRS website, Federal taxes also aren’t actually due until April 18, 2011 because the Federal Government is closed for Emancipation Day on April 15, 2011. MARYLAND STATE TAX RETURNS ARE STILL DUE BY APRIL 15, 2011, according to the Comptroller of Maryland’s site.

What does this mean for Towson Homeowners who file for the mortgage insurance deduction or have charitable contribution reductions? You must wait until Mid-to-late February for the IRS to get their system up & running to process these correctly.

105% Refinance on Fannie Mae or Freddie Mac Owned Loans

Yes, believe it or not, you read that right. Tasha Linton, of Atlantic Home Equity Mortgage shared with our office that they are offering 105% Refi Plus on Fannie Mae or Freddie Mac Loans!

What’s the deal? Primary and investment properties qualify (no limit to amount of properties owned). You can refi up to 105% LTV with NO mortgage insurance.

Why? This initiative is part of the Making Home Affordable program announced on March 4, 2009. According to the Fannie Mae website:

The goal of the refinance initiative, as announced by the President, is “to provide access to low-cost refinancing for responsible homeowners suffering from falling home prices.”

How do you know if you have a qualifying loan? You can check your qualifications right on the Making Home Affordable site, or call Tasha right away at 443-992-0783.

So what’s the catch? Well, you get limited cash out (which, in this market/economy makes sense). Also you must presently have no mortgage insurance. It is also currently only available until July 2009!

This is a great opportunity for those that have adjustable rate mortgages or interest only loans. This opportunity is not just for Baltimore homeowners, it is all over the US.

So take advantage if you are eligible. Here is YOUR bailout for being a conscientious homeowner!