Interesting reading from the Ada County Association of REALTORS®.
Of the approximately 399,498 owner-occupied houses in Idaho in 2009, 278,102 or 70% had a mortgage.
In 2008, 194,063 taxpayers in Idaho claimed a deduction for mortgage interest. The total amount deducted was $2,054,503,000. This means that the average taxpayer claiming the MID deducted $10,587 from taxable income in 2008.
At a marginal rate of 25 percent1, this means that the average taxpayer saved $2,647 in taxes as a result of the MID. The total tax savings from the MID in Idaho in 2008 was $513,625,750.
In 2008, 209,237 taxpayers in Idaho claimed a deduction for real estate taxes. The total amount deducted was $428,709,000. This means that the average taxpayer claiming the real estate tax deduction subtracted $2,049 from taxable income in 2008.
At a marginal rate of 25 percent2, this means that the average taxpayer saved $512 in taxes as a result of the real estate tax deduction. The total savings from the real estate tax deduction in Idaho in 2008 was $107,177,250.
If the MID and real estate tax deductions were eliminated, the loss would not be a one-year event; homeowners lose out on these potential savings each and every year. The present value3 of these lost savings could total $12,416,060,000. The value of all owner-occupied real estate in Idaho in 2009 was $87,262,337,900. If the lost tax savings are fully capitalized into the price of houses, the average decline in value in Idaho would be 14%. From the individual perspective, the median priced home in Idaho in the third quarter 2010 was $127,600. A decline in value as projected would mean a loss in home value of $18,155 for the typical home owner.
1 Marginal rates range from 10 to 35 percent.
3Present value calculation assumes 5 percent discount rate and 1000 year time horizon.
Sources for the data above include: Internal Revenue Service 2008, American Community Survey 2009, National Association of Realtors® 2010; All calculations are by the National Association of Realtors® Research Division
Published Dec 22, 2010. Reprinted with permission from Ada County Assoication of REALTORS®.