Home Mortgage Interest Deduction, Bourbonnais IL

Home Mortgage Interest Deduction History

Home mortgage interest is interest a homeowner pays on a loan secured by their home (a main home or a second home). The loan can be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan.

The home mortgage interest deduction is a very old tax deduction in the income tax law. Shortly after the 16th Amendment was ratified in 1913, the modern federal income tax was enacted. At that time all interest payments were made deductible.

Home Mortgage Interest Deduction, Bourbonnais IL

In 1986, the Tax Reform Act eliminated many tax deductions in the federal income tax, but it left the home mortgage interest deduction largely intact. It eliminated the deductibility of all consumer interest, including deductions for credit card debt and loans to finance cars, furniture, and other consumer durable items, but it retained a one million dollar limit on home mortgage interest deductions.

Again in the 1990s, there were proposals to replace the income tax system with a system based on taxing consumption, and these plans proposed eliminating the home mortgage interest deduction. These plans died out, however, over arguments about how the removal of the tax deduction on mortgage interest would affect the housing market.

Now, with the federal government strapped for cash and congressmen and women looking for ways to reduce the federal deficit, proposals are again being put forward to reduce the one million dollar limit or to completely remove the tax deduction on home mortgage interest. According to the Tax Policy Center:

ôIn 2012, the MID [mortgage interest deduction] will cost the federal Treasury an estimated $131 billion, much more than the total of all outlays by the Department of Housing and Urban Development ($48 billion). Homeowners also benefit from other federal tax preferences, including deductibility of residential property taxes on owner-occupied homes ($31 billion), and exclusion of tax on the first $250,000 ($500,000 for joint returns) of capital gains on housing ($50 billion).ö

Many economists believe that the United States encourages people to borrow money by offering the tax deduction of home mortgage interest. The home mortgage interest deduction helps promote home ownership, but many economists feel that a system that encourages people to take on more debt and discourages saving is not a good thing.

How Would the Removal of the Tax Deduction on Mortgage Interest Affect the Housing Market?

Home Mortgage Interest Deduction, Bourbonnais IL

In a rapidly growing economy, asset prices, such as the value of a home, increase. This makes the expected return from owning a home higher than if the economy is not growing as we've seen in recent years where housing prices have decreased dramatically.

The tax deduction on home mortgage interest makes the cost of owning a home lower. The removal of the tax deduction on mortgage interest would affect the housing market by causing the demand for homes to decrease and therefore housing prices to fall even more.

For example, most people base the decision to buy a house primarily on the monthly cost of owning versus renting. You calculate the rental equivalence that combines after-tax mortgage payments, property taxes, insurance, maintenance, and the cost of your down payment. Ginnie M' offers a Buying vs. Renting Calculator just for this purpose. For a given mortgage interest rate, removal of the tax deduction on mortgage interest increases the after-tax cost, leading to a higher monthly payment and, therefore, a decline in demand for owner-occupied housing. This reduction in demand ultimately reduces housing prices, but it is interesting to note that in countries that don't offer a mortgage interest deduction, like England for example, home ownership is about the same as in the U.S. Housing prices, however, are much lower.

Many economists argue that economies are better off when people are making financial decisions based on strong economic principals rather than tax considerations. In fact, some claim that the current housing crisis is due, in part, to increased borrower debt magnifying risk. An interesting question to consider is whether or not borrowers would have bought homes during the recent housing bubble if there had been no home mortgage interest deduction.

Mortgage Interest Deductions and Non-itemizers

Home Mortgage Interest Deduction, Bourbonnais IL

The effect that removing the tax deduction for home mortgage interest has on housing prices differs across income levels. Most of the benefits of the home mortgage interest deduction are accrued to higher-income households. This is mainly because lower-income households do not tend to itemize their tax returns, so mortgage interest deduction does not benefit non-itemizers to the same degree as wealthy homeowners.

Recent Proposals to Change the Mortgage Interest Deduction

Home Mortgage Interest Deduction, Bourbonnais IL

In November 2010, the co-chairs of the National Commission of Fiscal Responsibility and Reform issued a draft report containing a suggestion to reform the home mortgage interest tax deduction. The debt reduction draft report contains a modest change in the mortgage interest tax deduction. The proposal scales back mortgage interest deductions to eliminate interest on home equity loans and second homes, and it reduces the one million dollar limit on home mortgage interest deductions to $500,000.

In response to the above debt reduction draft report, House Resolution 25 was created on Jan. 6, 2011 by California Republican Representative Gary Miller, seeking to extend the mortgage interest deduction. The extension was drafted with American homeowners in mind. Approximately 67 percent of Americans are homeowners. The home mortgage interest deduction is one of their biggest deductions and saves taxpayers thousands of dollars every year. In addition to the tax saving, many feel that now is not the time to remove the tax deduction on mortgage interest because of how it would affect the already fragile housing market.

Five Factors that Help Determine the Market Value of Your Home, Bourbonnais, IL

Home Location

Location is the key influence for calculating the value of your home. Besides the proximity of the home to a major metropolitan area or a breathtaking view, these are a few more location factors that can increase home value:

• Proximity to schools, parks and points of interest ( see local School Ratings )
  

Homes within reasonable walkability to schools or parks will strongly influence buyers with small children. However, homes that boarder school or park property lines may suffer in home value due to unwanted traffic, parking limitations and the likelihood of youth mischief.

• Neighborhood with increasing desirability ( compare your local neighborhoods )
  

Where is new growth heading in town? Will there be any new business areas, grocery stores, or libraries in the future?

• Proximity to infrastructure ( see Map of your neighborhood )
  

Is the house surrounded by other houses? Apartment complexes? Other buildings? The best possible situation for your home is to be situated between two other houses and located along a road without yellow traffic lines.

Homebuyer Demographics

Five Factors that Help Determine the Market Value of Your Home, Bourbonnais, IL After you buy a house, the market value of your home is affected by who else is likely to purchase the property. If the property is a perfect starter home for pre-family newlyweds, and the main homebuyers in town are senior-citizens, the fair market value of your home might be lower than you think.

Older buyers typically look for one story homes without stairs, whereas families with small children often desire homes with a front yard away from a busy street and multiple bathtubs.

Home Storage Space

The more closets, garages and laundry rooms a house has, the higher the fair market value of your home. Most homebuyers look for a walk-in closet in the master bedroom, as well as closets in high traffic areas like front entryways, bathrooms and other bedrooms.

The two-door garage is the most common size for most homes, yet three-car garages are becoming more and more common.

As for the laundry room, the washer and dryer units should be located together in a common access space without creating an eyesore.

Kitchen

The kitchen is the most active area of a home. Typically, the following features add value to the kitchen:

• Granite countertops
• Stainless steel appliances
• Gas stovetops
• Convection ovens and microwaves
• Ice machines
• Cable television access ports

Also, the proximity of the kitchen to the dining room and family room will impact the usability of the house and thus is a factor in calculating the value of your home.

Home Layout and Size

Homebuyers typically look for homes with three to five bedrooms with an average of one shower per every two bedrooms. Split bedroom plans with bedrooms on opposite sides of the house are a popular trend with modern homes. Also, many real estate professionals love to use the phrase ôlight and brightö to highlight homes with lots of natural lighting.

As for size, most residential neighborhoods will have a slight variation in square-footage and number of rooms, but they all should be within a standard deviation of one another. If resale value of your home is a big concern, it's in your best interest to not buy the largest home in the neighborhood. When calculating the market value of your home, real estate professionals measure the homes in the surrounding area against yours, and if most of the nearby properties are smaller than yours, it can act as an anchor to drag down your fair market value.

4 Questions to Ask Before Buying a Foreclosure, Bourbonnais, IL. Foreclosures can offer big bargains, but buyers need to be careful that they don’t get over their heads in purchasing a home that may need more repairs than they bargained for.

Foreclosures are usually sold as-is, and homes that are left vacant standing too long can have a lot of maintenance problems.

Real estate experts suggest buyers consider the following questions:

4 Questions to Ask Before Buying a Foreclosure, Bourbonnais, IL.

1. How long has the home been vacant? Be cautious of a foreclosed home that has stood vacant for more than a few weeks or had its utilities shut off a long time. Marvin Goldstein, a home inspector for many foreclosed properties, says a home can deteriorate quickly when heating, cooling, electricity, and running water have been turned off for awhile.

2. How old is the home? Goldstein says that homes that are more than 50 years old may have a failing plumbing system or inadequate electrical wiring.

3. How does the home look? Are there broken windows, gutters hanging down, or damaged siding? “Trust your instincts. If the house looks bad from the outside, it's probably worse than you think,” Goldstein told The Oklahoman.

4. Is there anything missing? Sometimes former owners remove anything of value from the home, such as built-in light fixtures, bathroom tile, water heaters, air-conditioning units, and hardwoods, says Bill Jacques, president-elect of the American Society of Home Inspectors.

Housing experts encourage buyers to get a home inspector to look at the property, even if it is sold as-is, so that home buyers know any repairs needed and cost estimates before they purchase the home.

“Buying a bank-owned home gives you the opportunity to enter the market at a very low price level,” says Dorcas Helfant, a past president of the National Association of REALTORS®. “You can find terrific values among foreclosures, especially if they're not in too bad shape. But, remember, these houses are discounted for a reason.”

Source: “Foreclosed Homes May Need Extensive Repairs,” The Oklahoman (Jan. 28, 2012)

Sojourn, Independent Living, Kankakee IL. A Riverside Community

Before you choose an adult living community, consider this: Sojourn is located adjacent to Riverside Medical Center’s award-winning healthcare services, Riverside Outpatient Services and Riverside Home Healthcare. Sojourn is Medicare-certified and contracts with most private insurance providers. From independent living to skilled nursing, Sojourn delivers a seamless continuum of care, unrivaled in its one-of-a-kind approach.

Sojourn, Independent Living, Kankakee IL. A Riverside Community.

New Construction - The Estates at Sojourn is a 55 year and older community offering ranch style 2 or 3 bedroom homes. Life Estate Equity Ownership includes 24 hour security patrol, lawn care (tree & shrub care too!); daily social activities; heated outdoor pool; walking trails; fitness programs; monthly breakfast or dinner; optional Dining Plan available. Choose from 4 floor plans from 1464 - 1821 sq ft, and 1 or 2 car garages. All plans include walk in closets, fireplaces & patios. This Aspen Model welcomes you with a spacious Living Room with tray ceiling & fireplace and is open to the Kitchen with beautiful cabinetry, ample counter space, bay windows, snack counter & spacious dinette area. The Master Suite includes a linen closet, walk-in closet, comfort height toilet, walk-in shower, and double bowl cultured marble vanities. Optional 2 car garage available. Step-free! Super clean. Call to tour existing model homes.

Ranch Style Living

Sojourn, Independent Living, Kankakee IL. A Riverside Community. When you choose from the two- and three-bedroom ranch homes at Sojourn’s Independent Living, the stress of home ownership just melts away. Yet the benefits all remain - ample room to roam, your own quiet refuge, a place to entertain family and friends.It's complete independence, with the hassles neatly removed. Sound like your idea of ideal adult living? Then congratulations, you’ve just found your way home.

• Each home comes fully appointed and complete with appliances. Rates include utilities, so you can be secure in your consistent monthly costs
• Enjoy the peace and tranquility of your own home, without leaving your social life behind: All the activities of Sojourn are just a short stroll away
• Residents of Independent Living at Sojourn can enjoy the heated swimming pool. Nearby are the fitness center, spa and beauty salon

Apartment Style Living

Sojourn, Independent Living, Kankakee IL. A Riverside Community. For many, the ideal notion of independence includes a healthy dose of the social life. For those folks, we’ve created the elegant apartments of Sojourn’s Independent Living.

With a full host of activities literally in your building, a complimentary shuttle at your command, and Sojourn’s pool, spa, fitness center and beauty salon nearby, you’ll never lack for things to do. But after the excitement, you’ll love coming home: You have your choice of five different floor plans, either one- or two-bedroom models, all with private balconies. Appliances are all included, as are most utilities. Weekly housekeeping, 24-hour security and an in-unit emergency-response system let you breathe easy.

• Style, luxury and convenience will be your roommates at Sojourn’s Independent Living
• Each day, enjoy a continental breakfast buffet and either a gourmet lunch or dinner in our elegant dining room
• The fitness center at Sojourn will keep you revitalized and ready for the day’s events
• Residents of Independent Living at Sojourn can enjoy the heated swimming pool. Nearby are the fitness center, spa and beauty salon

Time for the annual tune-up of Old Smokey? You better believe it. There are a few things that are worse than a furnace acting up in the middle of the winter, but for the life of me I can't think of any right now. Your furnace needs an annual checkup and now is the best time to get it done. Waiting until the leaves fall or even until the snow flies is just asking for trouble. Now if you're depending on something like this to keep you warm through the year, then you might want to invest in a space heater.

Furnaces are kind of like the tires on your car or oil changes. Don't rotate the tires or change the oil on time and you will be buying new tires sooner or worse yet, buying a new car because the engine blew. The average life span of a furnace can be greatly extended just by getting this simple tune-up. While the tech is there, have him give the A/C a once over at the same time. That way you'll be ready for next summer.

Make sure your home is ready for winter. If you have questions, feel free to call

Scott Seaton

SLS Home Inspections @815-644-6271

Inspecting homes like yours in the Kankakee, Bourbonnais, Bradley, Illinois area since 2007.

Real Estate inspections with same day report delivery. Mold and air quality testing.

Visit my website at http://www.slshomeinspections.com/ or

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