Apr 28, 2009 6:48 pm US/Central
Reality Check: Mortgage Deduction Or Tax Credit
ST. PAUL (WCCO) ―
Gov. Tim Pawlenty said he will veto the tax hike bills passed by the Minnesota House and Senate if they reach his desk, setting the stage for conflict in the waning days of the legislative session.
Among the most controversial parts of the bill is a plan to eliminate the mortgage deduction and replace it with a tax credit.
What is the mortgage deduction and should you be worried?
Here's one example:
The houses are exactly the same and the mortgages are identical. However, the owner of one house gets hundreds of dollars more in mortgage tax breaks than the other owner.
What's the difference? One homeowner makes more money than the other.
"The person with the big, high income gets a whole bunch of tax subsidy," according to Rep. Ann Lenczewski, the DFL Chair of the House Tax Committee. "The person with the low income may get none or very little."
It's TRUE.
The more you make, the bigger the tax benefit. Right now, homeowners subtract mortgage interest from their incomes and pay a lower tax.
But Lensczewski wants to change the tax deduction to a tax credit, allowing all homeowners to
subtract up to $420 from their tax bill no matter how much money they earn.
Here's what you NEED TO KNOW.
Most Minnesotans get no mortgage benefit at all. That's because 46 percent of Minnesotans don't itemize their taxes, so they get nothing, according to Lensczewski.
Twenty-five percent of homeowners have paid off their mortgages and only 29 percent actually qualify for a
mortgage interest deduction, no matter how much they make.
The Minnesota Department of Revenue estimates that eliminating the mortgage deduction and replacing it with a tax credit could raise $400 million annually.
And ONE MORE THING.
Your federal mortgage interest deduction will not change and that's the largest tax benefit for most homeowners.
That's Reality Check.
To check the resources for this Reality Check click on the links below:
House Passes Bill Carrying Tax Hikes - And A Veto Target
Better Value For Housing Subsidies
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