Many Maryland homeowners may not realize that part of Gov. Martin O’Malley’s recent proposal in the Budget Reconciliation and Financing Act of 2012 (BRFA, HB 87/SB 152) will reduce or eliminate tax deductions, including the mortgage interest tax deduction, to help fill in the $1.1 billion deficit hole.
Under the governor’s proposal, Maryland taxpayers whose federal adjusted gross income exceeds $100,000 would decrease their deduction by 10 percent. Taxpayers with adjusted gross income more than $200,000 would see their deductions decrease by 20 percent.
For those of you thinking, “Well, I don’t make that much money, so it doesn’t affect me,” it may affect the entire housing market regardless of the income you currently make or whether you own or rent.
Maryland’s housing and real estate account for more than 20 percent of the gross state product. The housing market in the Annapolis area has been showing improvement over the past 18 months.
But the market still has numerous vacant homes pulling down the value of resale homes. If this legislation goes into effect, there could be another economic hit to the housing resale market.
In the Annapolis area alone, rents have increased more than 20 percent in many areas. And renters are finding it more difficult to locate quality living accommodations even in the higher price ranges.
If buyers decide to rent in lieu of opting for homeownership, rents could continue to increase as demand outpaces supply.
Usually when there is one cut or tax increase, it doesn’t necessarily stop there. Eventually, we could see the mortgage-interest deduction eliminated completely.
This is also just Maryland’s budgetary cut. The Federal government has attempted, but failed, on several occasions to eliminate the mortgage-interest deduction. But this, too, could change.
As the Maryland mortgage-interest deduction goes up for legislative vote, Realtors and concerned homeowners are set to rally at the Lawyer's Mall in front of the State House in Annapolis on Wednesday between 8:30 and 11:00 a.m.
Those homeowners interested in being part of the rally are welcome to join in to make their voices heard.