The Anna Maria Island Sun Newspaper

Vol. 11 No. 15 - January 12, 2011


Proposal to reduce mortgage deductions

You've heard it said that the third rail of the U.S. economy is Social Security and that no one in elected office with a pulse will touch it. Up until now the same was true for the mortgage tax deduction, but with the national debt increasing by the minute, some of those same politicians will do just about anything to get their hands on some extra cash.

On Dec. 1, while most of the country was getting caught up in pre-holiday planning and shopping, the president's debt commission released its 65-page report intended to be a blueprint for a reduction in our national debt. Among the recommendations in the commission's report is one to amend the current tax deduction for mortgage interest on homes.

Under the current IRS regulations, mortgage interest on homes is capped at a $1 million mortgage. The new proposal would reduce this cap to $500,000 and also restrict the deduction to primary residences only. There would also be an elimination of interest deductibility for home equity loans which are currently capped at $100,000.

The National Association of Realtors and other consumer groups have, of course, come out against instituting these changes contending that this would reduce the value of all homes by as much as 15 percent or the value of the stream of tax savings. For example, it is estimated that the present value of mortgage tax deductions on a $625,000 home to be worth more than $72,000 in today's dollars.

Take away the deduction and the house is now worth that much less. If this really happened it would be an enormous blow to the 60 percent of Americans who already own their homes, adding to the double digit home value declines during the past few years.

Homeowners currently are allowed to take an itemized deduction for the interest they pay on their home mortgages. With conventional loans, most of the payments in early years go to pay interest on the loan and only a fraction going to principal. Therefore, most home purchasers not only consider purchasing a home as a place to live but also consider that it is buying an asset that translates into a valuable tax deduction.

Under the current tax code, a family that pays a $3,000 mortgage payment each month likely will get approximately a $2,300 per month deduction in the early years of owning the home based on its tax bracket. Obviously, this is the reason the debt commission recommended removing this benefit.

Supporters of the mortgage tax deduction provision, which started in 1913, contend that it has allowed millions of Americans to afford homes. Conversely, the detractors say the deduction led homeowners to overleverage by buying bigger homes that they wouldn't otherwise be able to afford.

On an island like Anna Maria, eliminating the mortgage tax deduction would be even worse than in more conventional locations. Since we attract a large percentage of second home and investment homeowners, and where it has not been uncommon for property values to be high enough to require over $500,000 mortgages, it would only set our real estate market back – just when it is in a full recovery.

Chances are the mortgage tax exemption third rail will not go on fire and homeowners and the real estate market will continue to benefit. But just in case, keep an eye open when Congress goes back in session and starts getting serious about improving its income stream and unimproving yours.

Real Estate Transactions
Closed sales between Aug. 2 and Oct. 9, 2010

Anna Maria

721 North Shore Single family $1,100,000
512 Bayview Place Single family 800,000
216 Palm Ave. Single family 699,000
104 Maple Ave. Single family 667,500
309 S. Bay Blvd. Single family 425,000
780 Jacaranda Rd. Duplex 357,500
216 Archer Way Single family 332,500
204 Archer Way Single family 300,000
333 Tarpon St. Lot 300,000

Bradenton Beach

500 Bay Dr. S. Single family $965,200
2317 Ave. C #300 Condo 315,000
1325 Gulf Drive N. #165Condo 300,000
1325 Gulf Drive N. #166Condo 300,000
1325 Gulf Drive N. #164Condo 285,000
1325 Gulf Drive N. #161Condo 285,000
1325 Gulf Drive N. #264Condo 280,500
501 Gulf Drive N. #103Condo 240,000
1325 Gulf Drive N. #163Condo 239,800
501 Gulf Drive N. #305Condo 227,000
2211 Ave. C Single family 220,000
2311 Canasta Drive Single family 165,000
2412 Gulf Drive. N. #125Condo 160,000
2412 Gulf Drive N. #224Condo 155,000
2412 Gulf Drive N. #225Condo 155,000
1603 Gulf Drive N. #18Condo 150,000
1603 Gulf Drive N. #19Condo 150,000
117 Seventh St. N. #9 Condo 150,000
1603 Gulf Drive N. #33Condo 109,000
107 Sixth St. S. Single family 100,000
2503 Gulf Drive N. #302Condo 100,000
1603 Gulf Drive N. #34Condo 70,000


12909 42nd Terr. W. Single family $1,025,000
11900 Cortez Rd. W. RV resort
#10, #17, #28, #45 Multi-units 619,700
4224 Marina Ct. Condo 525,000
3860 Mariners Way #413Condo 274,900
12329 Baypointe Terr. Lot 140,000

Holmes Beach

528 72nd St. Single family $1,450,000
3212 Gulf Drive Single family 1,300,000
616 Hampshire Lane Single family 775,000
3009 Ave. F Duplex 763,500
403 80th St. Condo 595,000
203 76th St. Condo 584,500
525 74th St. Single family 550,000
612 North Point Drive Single family 525,000
303 61st St. #A Condo 510,000
209 69st St. Duplex 480,000
6200 Flotilla Drive #273 Condo 480,000
227 85th St. Single family 440,000
517 70th St. Single family 416,500
203 82 St. Condo 400,000
519 77th St. Single family 400,000
405 N. Harbor Drive Single family 400,000
614 Concord Lane Single family 399,900
506 74 St. Single family 390,000
405 74 St. Condo 375,000
3706 Gulf Drive. Single family 370,000
6250 Holmes Blvd. #70 Condo 355,000
6200 Flotilla Drive #274 Condo 365,000
322 64 St. Condo 350,000
207 55 St. Single family 305,000
4104 6 Ave. Condo 285,200
609 Emerald Lane Single family 285,000
2903 Ave. B Duplex 278,000
3703 5 Ave. #3 Condo 270,000
309 58 St. Duplex 270,000
3207 6 Ave. Single family 260,000
3803 East Bay Drive #2 Condo 260,000
6919 Holmes Blvd. Half duplex 250,000
2805 Gulf Drive Single family 249,000
3702 Sixth Ave. #4 Condo 230,000
504 Key Royale Drive Single family 223,000
2705 Ave. C Single family 200,900
2710 Ave. C Single family 160,000

Source: Manatee County Property Appraiser’s Office

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