Fort Smith homeowners may be in for a real shocker come April. In an effort to help balance the over-bloated budget, the President will recommend that the federal tax deduction on interest paid on your primary home mortgage be eliminated. The Wall Street Journal reported Monday that the White House contends that this deduction, in conjunction with child tax credits and the ability of employees to pay their portion of their health insurance tab with pretax dollars, costs the government $1 trillion a year. President Barack Obama created the National Commission on Fiscal Responsibility and Reform in February, amid concern from lawmakers and economists that the growing budget deficit could damage the country's long-term fiscal condition. This bipartisan commission, which is made up of mostly lawmakers, is not expected to reach any decisions before the upcoming mid-term elections.
So, how does this really effect me, you ask? Let's use an average Fort Smith home sale of $135,000. Assuming that you finance it for 30 years at an interst rate of 4.25% and you are in the highest federal tax bracket, you will pay approximately $5693 your first year as a Fort Smith homeowner. Because of the current tax laws, you will have a tax savings of $2236 that first year. To figure your tax savings, try this calculator.
This could be devastating to the housing market, which is a local and national stabilizer to our economy. The effects could be far reaching and potentially devastating not only to Fort Smith homeowners but all homeowners nationally.