Information about the MID

Although recent reports of plans by Congress to eliminate or modify the mortgage interest deduction are widely exaggerated, Realtors in Orlando and around the country will remain actively engaged to ensure that the nation’s 75 million homeowners will continue to receive this important benefit.

“The MID is both a powerful incentive for homeownership and one of the simplest provisions in the tax code,” said Orlando Regional Realtor Association Chairman of the Board Mike McGraw, McGraw Real Estate Services, PL. “It saves the average homeowner thousands of dollars at tax time and helps American homebuyers get into their first house.”

The MID allows an individual to deduct mortgage interest paid on mortgage debt of up to $1 million. The deduction is available for interest on mortgages for a principal residence and one additional property. Individuals claiming the MID also must itemize their taxes.

The ability to deduct the interest paid on a mortgage can translate into significant savings at tax time. For example, a family who bought a home this year with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file next year.

According to the most recent IRS tax return data available, 65 percent of families who claim the MID earn less than $100,000 per year. According to economists at the National Association of Realtors, homeowners already pay 80 to 90 percent of U.S. federal income tax, and among those who claim the MID, almost two-thirds are middle-income earners. If the tax break is modified or eliminated, home values could fall 15 percent nationwide, as buyers discount the value of the MID in their purchase offers.

In today’s market, eight out of 10 homebuyers must borrow money to buy a home. For aspiring homeowners who don’t have hundreds of thousands of dollars in savings to buy a home outright, tax benefits such as the mortgage interest deduction help them begin building their future through homeownership.

“If and when altering the MID ever becomes a discussion point in Congress, the Realtor community stands ready to defend it,” McGraw said.