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Experts Fear Capital Gains Tax Changes Could Seriously Hamper Commercial Real Estate Investments

real estate investingA congressional committee has taken up the task of making recommendations to lower the staggering federal deficit.  Tax reform, including reducing or eliminating the mortgage interest deduction, is one of the strategies under consideration.

But the Mortgage Bankers Association thinks nixing the mortgage interest deduction is a bad idea.

Its Chairman, Michael D. Berman, CMB, crafted a statement reacting to options contained within a draft proposal from the co-chairs of the National Commission on Fiscal Responsibility and Reform:

“Given the fragile state of the nation’s housing market, now is not the time to be scaling back incentives for homeownership. The mortgage interest deduction is one of the pillars of our national housing policy, and limiting its use will have negative repercussions for consumers and home values up and down the housing chain.

“We are also concerned about proposals to tax dividends and capital gains at ordinary tax rates, which would seriously impact investment in commercial real estate.

“We share the widespread concern over the growing national debt and want to help identify reasonable solutions, but we cannot support proposals that would chip away at the foundations of the real estate market.”

A copy of the commission’s draft proposal can be found here.

The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry.

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  • Gary Carlson

    Washington just can’t seem to decide which way to go. First, there was the $8,000 incentive to encourage folks to buy a home. Now, here’s a proposal to discourage same. The tea party apparently has more work to do.

  • I don’t think the mortgage interest deduction makes sense for 2nd homes and I also don’t think the deduction makes sense for homes above some value – perhaps tied to some upper limit income level. I live in Washington, DC and understand that higher cost areas result in much higher values, but perhaps tieing the deduction to 20X the average national income or something to that effect makes sense. Taxpayers should not subsidize the construction and ownership of mansions.

    Ideally, we probably shouldn’t have the deduction at all, but I don’t think this is a realistic expectation.

  • Cheryl

    I think we can expect an increase in foreclosures for those already hanging on a thread should this deduction decrease. Blake, High earners are not exempt from being over-extended. For instance, a new professional just out of school could be a “high earner” with staggering student debt and a young family. Why are high earners constantly targeted to pony up for the rest of us?

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