NEW YORK (MainStreet) Among the cherished rights of homeowners, two stand out: the tax deduction on mortgage interest payments and the tax exemption for profits on a home sale. If a Washington-based coalition has its way, both would be cut for wealthier homeowners.
At the same time, the coalition proposes an IRA-like savings account to allow prospective homeowners tax exemption on savings for a down payment. That begs the question: Under today's conditions, what is the best way to save for a down payment?
The coalition's proposals may never go anywhere, but they do show that anything could be on the table as Congress and the administration look for tax reforms.
Membership in the group Smart Growth for America includes environmental organizations, developers and investors and others focused on sustainable development, largely with a focus on making cities more livable. Its housing proposals would leave long-standing government support in place for homeowners of low and moderate incomes, but reduce benefits for wealthier property owners.
The coalition, for instance, recommends eliminating the mortgage interest deduction on second homes. For primary residences it would reduce the maximum debt to which the deduction could be applied to $500,000 from the current $1 million. It also recommends limiting real estate tax deductions for households making more than $100,000 a year.
And it would cut in half the tax exemption for profits on a home sale, setting a $125,000 limit for individuals, $250,000 for couples filing joint returns.