Question: There are so many reasons to own real estate but one of the most important advantages to me is the tax deduction I get for the interest on my mortgage. Someone told me that this is going to go away. Should I sell my house and rent?
Answer: There are many advantages to home ownership. "The desire for homeownership is deeply rooted in the American psyche. Owning a home embodies the promise of individual autonomy and of material and spiritual well-being that many people sought in coming to this country. In addition to its functional importance and economic value, homeownership has traditionally conveyed social status and political standing. It is even thought to pro-mote thrift, stability, neighborliness, and other individual and civic virtues." (Urban Policy Brief) Homeowners especially enjoy building equity, appreciating property value and having a sense of ownership of something important. Tax advantages are important also.
Tax reform has been a hot issue recently and the tax cuts that were enacted during the Bush administration are due to expire at the end of the year. The mortgage interest deduction, sometimes the only major tax deduction that many taxpayers have, is one under consideration for elimination.
The deduction for mortgage interest has been in place for more than 100 years. Its critics are saying that it is an ineffective policy and other incentives would be more effective in helping people purchase homes. Other critics say it encourages debt and causes consumers to purchase houses that are not affordable.
Some experts make the argument that if homeowners no longer have the mortgage interest tax deduction, large numbers of homeowners who are upside down in their property values will consider the loss of the deduction the last straw and walk away from their homes.
The experts don't agree about the effects of the deduction but they do agree that it is likely that the deductions will be extended when they expire. Experts predict it would be unlikely that any new policy would wipe out the deduction entirely in one year. The more likely event would be a phase-based program that starts with expensive houses.
Your financial situation, the equity you have built, the value of the home and other personal and lifestyle considerations should come into play when you are considering whether to rent or own. Consider discussing your situation with a professional.
Attorney Sylvia Heldreth is a certified specialist in real estate law. Her office is located at 1215 Miramar St., in Cape Coral.
This article is not intended as specific legal advice to anyone and is based upon facts that change from time to time. Individuals should seek legal counsel before acting upon any matter involving the law.