Mar 03 2009
Will Tax Deduction Change Affect Vacation Home Sales?
While legislation that has been proposed or passed thus far has been meant to stimulate the housing market, the latest proposal is questionable. The latest plan of the new administration is a proposed mortgage interest deduction , which would cap all deductions at a 28% rate. The plan is to reduce the mortgage write-off and it is causing a stir. Many believe that the plan will affect people who make more money and who own higher-end real estate. That brings up resort real estate because many people who own second homes are in the higher tax bracket, those who will be affected by the proposed plan.
Those that are against the plan believe that it will deter people from purchasing more expensive real estate. The National Association of Realtors (NAR), while they have supported the new administrations housing stimulus package thus far, is wholeheartedly against reducing the amount of mortgage interest that a person can write off. NAR president, Charles McMillan sent a letter to President Obama stating his dissatisfaction with the new proposal. In the letter McMillan said, “There is never a good time to propose something that undermines the basic foundation of homeownership, but given our current housing crisis, this has to be the worst possible time.” He went further to say, “The tax deduction of interest paid on mortgages is both a powerful incentive for homeownership and one of the simplest provisions in the tax code. It should not be targeted for change.”
In today’s economic climate, where every step possible is being taken to boost the economy and the housing market, no one wants to see a step taken backwards. NAR would like to urge Obama’s administration to continue putting incentives in place and leave the tax write-off where it is for the time being. Should this plan pass it could have an adverse effect on vacation real estate investing .
