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Paul Suding: Legislators Taking Aim at Mortgage Interest Deduction

The MID encourages homeownership, and Realtors are advocating to preserve it

Ever heard of the MID? Chances are that you have — the mortgage interest deduction. It’s a pretty hot topic these days.

As I mentioned last week, the Realtor Party is an advocate for homeownership. The mortgage interest deduction is certainly one of the primary benefits of homeownership, and helping preserve it is clearly one of our intentions.

Scaling back the cost of the deduction is the aim for some legislators in their efforts to help balance the budget. Until 1986, there was no state or federal limit on the amount of mortgage interest one could deduct for principal or second homes.

The 1986 federal Tax Reform Act established the present cap on the MID. Both state and federal law (the state conformed to the federal change in 1987) now limit the deduction to the interest paid on a maximum $1 million of mortgage debt (first and second homes) plus $100,000 in home equity debt.

Critics of the MID have argued that it provides a disproportionate tax subsidy to the affluent and diverts state and federal housing funds that would be more effectively spent on housing for the less fortunate. In addition, the Legislative Analyst’s Office has regularly recommended elimination of the MID, contending that it “has a small impact on the rate of homeownership.”

As advocates, we have responded that the MID encourages homeownership. The United States has achieved one of the highest rates of homeownership in the world since the deduction came into common use. Homeownership promotes community stability and pride, employment, savings and long-term investment.

If this issue is important to you, we encourage you to contact your state and federal representatives to voice your opinion.

Paul Suding, a real estate agent with Cool Santa Barbara Homes and Village Properties, is president of the Santa Barbara Association of Realtors. He can be contacted at .(JavaScript must be enabled to view this email address) or 805.455.8055.

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