Real estate agents urged to fight tax deduction change Real estate agents urged to fight tax deduction change (December 14, 2005)

** President's advisory panel proposes reducing mortgage interest deductions.

By Andrea Gemmet

Almanac Staff Writer

In the Bay Area, where the median cost of a home is more than $600,000, most homebuyers need all the financial help they can get -- including tax breaks on mortgage interest and property taxes.

Local Realtors are closely watching a proposal that would eliminate a large portion of the federal income tax deduction on mortgage interest for Bay Area homeowners, and the local Realtors association is urging members to dig deep and contribute to lobbying efforts to defeat it.

A cap on the amount of interest for home loans that could be deducted would be tied to the Federal Housing Administration's limit on guaranteed mortgages. It varies by region, but in the Bay Area it's a little over $300,000. Interest paid on mortgage amounts in excess of that limit would not be deductible.

President George W. Bush's Advisory Panel on Federal Tax Reform has proposed capping the amount of interest on home loans at the FHA limit, a plan that could have a huge financial impact on real estate in places like the Peninsula, where the cost of starter homes far exceeds the FHA cap of $313,000.

"For a median-priced home in San Mateo County, you would go from a $9,000 deduction to a $2,700 deduction," said Paul Cardus, the government affairs director for the Silicon Valley Association of Realtors.

Mr. Cardus, speaking at a meeting of real estate professionals at the Left Bank restaurant in Menlo Park on December 5, said the advisory panel's proposal would also eliminate deductions on property taxes and mortgage interest payments for second homes.

"The good news this morning is that the president of NAR (National Association of Realtors) has reinforced the idea that there is not a single member of Congress who has embraced this," Mr. Cardus said.

The association has been running full-page ads opposing the proposal in Washington, D.C., newspapers, and is hoping to sway the incoming chair of the House banking committee. Lobbying Congress is the association's best chance of swaying the outcome, he said.

He urged members to boost their contributions to the Realtor action fund to finance the fight, and he warned that even if the tax proposal is not pushed next year, it will likely surface in 2007.

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