Kansas Gov. Sam Brownback has proposed eliminating the state’s mortgage interest deduction — a change that would cost the typical Kansas home owner nearly $400 a year in additional taxes and potentially lower home values there, says Luke Bell, vice president of governmental affairs for the Kansas Association of REALTORS®.
The governor’s plan would take away home owners’ ability to claim itemized deductions on their state income taxes, including the mortgage interest deduction.
His plan wouldn’t affect Kansans’ ability to claim the deduction on their federal income taxes.
More than 417,000 Kansas home owners use the mortgage interest deduction, claiming about $162 million annually. The average home owner ends up saving about $390.49 per year thanks to the deduction, Bell said.
The plan isn’t popular with Kansans. A recent KAR survey found 63% of Kansans oppose eliminating the home mortgage interest deduction as part of a bigger plan to cut state income taxes. Opposition to the plan is intense, with 41% “strongly” opposed and only 14% strongly in favor of the plan.
The mortgage interest deduction heavily influences home buyers. More than 80% of Kansans said the availability of the deduction factors into the home-buying decision, a recent KAR survey found.
More than one quarter (28%) said it was a “big” or “huge” factor; only 11% said it wasn’t important.
More than two-thirds (67%) of Kansans say that eliminating the home mortgage interest deduction would have a negative impact on the Kansas housing market and the overall Kansas economy, the survey found.
Nationally, more than 70% of the mortgage interest payments claimed as deductions is on returns filed by people with incomes between $60,000 and $200,000, according to the IRS.
First-time home owners and trade-up buyers often get the most benefit from the deduction because you pay the most mortgage interest when you first take out a mortgage. (You won’t pay equal amounts of principal and interest until year 13 or later, depending on your interest rate.)
People with large families also get a lot of bang from mortgage interest deductibility — they buy relatively big houses for their big families.
Gov. Brownback failed to find support for a similar proposal last year, and the Kansas Association of REALTORS® hopes it can defeat the measure again this year. It plans to bring together the measure’s opponents at a rally for home ownership on Feb. 13 at the state capitol in Topeka.