Facts on the mortgage interest and real estate tax deductions in Florida

Proposed tax reform threatens mortgage interest deduction. NAR has launched a campaign to highlight their opposition on any proposal that results in higher taxes on middle class homeowners. Here are some facts on the mortgage interest and real estate tax deductions in Florida. 

Of the approximately 4,694,000 owner-occupied houses in Florida in 2014, 2,729,000 or 58% had a mortgage.

In 2014, 1,465,400 taxpayers in Florida claimed a deduction for mortgage interest (MID).  The total amount deducted was $13,341,920,000.  This means that the average taxpayer claiming the MID subtracted $9,100 from taxable income in 2014 as a result of the MID.

At a marginal rate of 25 percent[1], this means that the average taxpayer saved $2,280 in taxes as a result of the MID.  The total tax savings from the MID in Florida in 2014 was $3,335,480,000.

In 2014, 1,731,800 taxpayers in Florida claimed a deduction for real estate taxes.  The total amount deducted was $8,439,563,000.  This means that the average taxpayer claiming the real estate tax deduction subtracted $4,850 from taxable income in 2014.

At a marginal rate of 25 percent[2], this means that the average taxpayer saved $1,220 in taxes as a result of the real estate tax deduction.  The total savings from the real estate tax deduction in Florida in 2014 was $2,109,890,750.

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 value[3] of these lost savings could total $139,624,891,000.  The value of all owner-occupied real estate in Florida in 2014 was $1,063,574,548,300.  If the lost tax savings are fully capitalized into the price of houses, the average decline in value in Florida could be 13%.  From the individual perspective, the median priced home in Florida in 2014 was $166,900.  A decline in value as projected could mean a loss in home value of $21,900 for the typical home owner.

Here is some more info on this topic:
* The average amount deducted as a result of MID/real estate tax deduction by Congressional Districts and State
* PwC study on the impact of tax reform options on owner-occupied housing
* President Brown’s statement on tax reform proposal

 

[1] Marginal rates range from 10 to 35 percent. 

[2] Ibid.

[3] Present value calculation assumes 3.9 percent discount rate and 1000 year time horizon.

Sources for the data above include: Internal Revenue Service 2014, American Community Survey 2014, National Association of Realtors® 2014; All calculations are by the National Association of Realtors® Research Division, July 2017.