A new bill proposes providing tax breaks for renters. Is it a good deal? What will it mean for the Long Island housing market?
Newly proposed legislation aims to allow renters to deduct their rent when filing income taxes. The move would provide renters the equivalent of the mortgage interest deduction (MID) for homeowners. But is it all it is cracked up to be?
A new tax break for renting sounds like a welcome rule for tenants. However, like many other tax breaks it may be unlikely that most will feel any tangible benefit in their bank accounts. According to the data around 70% of tax filers use the standard deduction, and do not itemize suggesting no extra relief for the majority. However, as a marketing tool this could lure more individuals and families into renting. Yet, landlords may seize on the opportunity to raise rents as some tenants may be able to write off their rent.
One nonprofit suggests the best benefits of this break for those that can use it is empowering renters to save more money as a down payment to buy homes. It certainly could. And for some all it may take is one big tax refund check to get into their own home with a low down payment home loan.
On the other hand this could greatly diminish the attractiveness of buying a home. MID was one of the big perks of buying. Then the question is how the government will offset the thousands expected to be handed back to renters each year? Will they pass that cost onto homeowners and landlords?
Renters may welcome the promise of a new tax break, but make sure you do the math carefully. Talk to your tax professional to determine any real net benefit. Make sure you know how the numbers really stack up against the expenses of owning a home, and your ability to negotiate them.