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Diane Gallagher

Thank you for a great year as president of the Lodi Association of Realtors

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Posted: Friday, December 28, 2012 7:15 am

This will be my last article for the year! My term serving as the president of the Lodi Association of Realtors for 2012 is over.

I have had a great year which I have enjoyed a lot. My goal for the year was to give you as much information as I could on the Real Estate market in our area.

With that came a lot of challenges because I wanted it to be as current as possible. That meant writing at the last minute to be sure you weren’ hearing things that was out there weeks prior. I hope you have enjoyed them and felt they were worth reading. I know I enjoyed writing them for you.

This month the new president for LAR was installed, Sheri Aguilar. She will be the next in line to present you with information about the Real Estate market. I wish her the best of luck throughout the year to come.

As you know the Mortgage Interest Deduction (MID) is still asking Presiden Obama and Congress to preserve the Mortgage Interest Deduction in its entirety during their “fiscal cliff” discussions. We all hope and pray that this is extended.

Here is a little history of how the MID came about.

Here’s a look at some claims that have been made about the deduction, and the facts behind them.

Claim: The mortgage interest deduction was intended to promote homeownership.

Fact: When the federal tax code was introduced in 1913, all interest was deductible. At that time, relatively few Americans except farmers had home mortgages, says Martin Sullivan, a contributing editor with Tax Analysts, a publication for tax professionals. “I’m pretty sure nobody intended it as a subsidy for the great American dream.”

In 1986, when Congress overhauled the tax code, it eliminated the interest deduction for most consumer debt, including auto loans and credit cards, but kept it for mortgages used to buy, build or substantially improve a home.

This exception was a result of “brilliant lobbying” by the housing industries, says University of Southern California real estate professor Richard Green.

In 1987, Congress limited the deduction to interest on up to $1 million in mortgage debt on a first and second home. But it also created the home-equity deduction that lets homeowners deduct interest on up to $100,000 in mortgage debt used for purposes other than buying, building or improvin a home. This was a back-door way of letting homeowners (but not renters) once again deduct interest on consumer debt.

It’s hard to see how the home-equity deduction promotes homeownership since it subsidizes people who use their houses like piggy banks, thereby depleting their home equity. Even real estate lobbyists have a hard time defending it, other than to say now is not a good time to be messing with the oh-so-fragile housing market.

Claim: The mortgage interest deduction is wildly popular.

Fact: In many surveys, it enjoys strong support. In practice, only 25 percent of households that filed a federal tax return in 2010 claimed the deduction, even though the homeownership rate was about 67 percent.

To claim it, homeowners must itemize their deductions; but for many, their standard deduction is higher than their itemized deductions combined, meaning they get no benefit from the mortgage interest deduction.

So why is it so popular? Even if you are not claiming it now, you may have claimed it in the past, hope to claim it in the future or think the person who will buy your home can claim it, says Leslie Appleton-Young, chief economist with the California Association of Realtors. The association surveyed 800 people who bought a home in 2012, and 79 percent said the mortgage interest and property tax deductions were “extremely important” in their home-buying decision. Of course it is, this is the only deduction still allowed on our taxes. With that being said, here is the last thing want to say:

The New Year is here, this is my prayer for all of you. For every one of you out there, I pray you will be blessed with prosperity, well being, andmost of all good health. May God bless you abundantly.

Diane Gallagher is the president of the Lodi Association of Realtors for 2012.