Some readers think that congressional proposals to eliminate tax deductions for mortgage-interest payments would make the rich pay their “fair share.” However, middle-income families would feel the most pain if the write-offs are axed.
Q-I’m angry. When you said that plans to cut back on mortgage-interest deductions that homeowners are allowed to take “could hurt everyone’s property values” because the tax advantages of owning would be removed, you neglected to point out that the biggest beneficiaries of such deductions are millionaires.
Preserving the deduction would save someone like Sylvester Stallone a lot more money than it would save the typical homeowner. Eliminate the deduction and let the rich pay their fair share!
A-That’s the same argument that I’ve heard from many congressional representatives who want to kill the deduction. However, a closer look at just who the “typical homeowner” is blows that argument right out of the water.
According to the National Association of Realtors, the average owner is about 41 years old, married and has three kids. The family earns about $52,000 a year, which I don’t think meets anyone’s definition of “rich.” Yet, this is the type of family that gets stuck with a big tax bill every year because they can’t afford those high-powered tax shelters that lawyers and accountants peddle to rich people on Wall Street or in Beverly Hills.
The mortgage-interest deduction is the last major tax break that middle-income families can claim.
It’s also worth noting that many real millionaires don’t even bother taking the mortgage-interest deduction. Previous tax-reform legislation already caps their ability to claim the write-offs. Many rich people prefer to pay all-cash for their homes because they don’t like lenders poking around in their financial affairs, so they don’t have any mortgage-interest deductions to claim in the first place.
According to DataQuick Information Systems, a respected California-based firm that tracks sales and lending trends, the rate of all-cash sales of homes worth more than $1 million in Beverly Hills and surrounding areas is typically about five times the rate of all-cash sales in blue-collar neighborhoods.
Keeping the deduction for mortgage-interest charges would benefit the relatively small portion of millionaires who finance their purchases, but that’s no reason to rob millions of middle-income homeowners of this important tax break.
Q-My company is transferring me to a new job in another state, and I have to move right away. I have been given a choice: The company will either buy my home from me, or will pay for moving all my possessions into the apartment that I will begin renting next month.
I’m leaning toward listing my home with a sales agent and having the company pay for my move, because the move would cost about $5,000 and I can’t come up with that kind of cash right now. What do you think I should do?
A-If you can’t scrape up $5,000 to pay for the move yourself, you’ll probably have to accept the company’s offer to pay for your moving expenses and then pay the agent’s commission out of your own pocket when your current home eventually sells.
But if there’s any way you can borrow the money to pay for the move, selling your home to your company would likely be your best choice.
You didn’t tell me how much your current home is worth, but you’re probably going to have to pay an agent a six percent commission in order to sell it. Even if the home would fetch only $100,000, the commission would be $6,000-about $1,000 more than you would pay for the services of a professional mover. Your actual savings would be even greater, because you could deduct your moving expenses on your tax return. And if the agent can’t sell your house quickly, you’ll be stuck paying the monthly mortgage on your old home as well as the rent for your new apartment.
Of course, you need to make sure that the company is willing to pay a fair price for your house. Consider spending a few hundred dollars for a professional appraisal of its value, or at least ask a few local agents to estimate how much the home could be sold for today. If your employer’s purchase offer is too low, you can use their reports to negotiate for a higher sales price.
Q-I think that my annual property-tax bill is too high, but the bill itself does not say what the local tax assessor believes my home is actually worth. Instead, it only lists an “assessed value” of my home, which is $24,500-a lot less than the amount my house would sell for today.
How can I use this assessed-value figure to determine what the assessor believes is the true market value of my home, so I can appeal my tax bill if the estimate is too high?
A-All you need to do is call your local assessor or tax collector and ask for your neighborhood’s “assessment rate” and then perform a 10-second mathematical calculation.
Assessment rates vary widely from state to state, and sometimes even from one county to the next. I called the assessor in the county where you live and learned that the local assessment rate is 16 percent of a home’s estimated market value.
Since your assessed value is $24,500, the government figures the house is actually worth $153,125 (24,500 divided by .16 153,125).
If you think your home is worth less than $153,125, ask a local real estate agent to provide you with a list of comparable homes that have recently sold in your area to support your claim.
If similar homes have sold for only $130,000 or $140,000, you can submit the agent’s list as evidence when you file your appeal and bolster your chances of winning a reduction.
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Write to David Myers at P.O. Box 2960, Culver City, Calif. 90231-2960.
