Deficit package will affect rich, poor

November 25, 1990|By Thomas J. Lueck | Thomas J. Lueck,New York Times News Service

The nation's 1991 deficit-reduction package will make real estate a slightly less attractive tax shelter for the most affluent families while continuing incentives for low-income housing, according to accountants and tax experts.

The legislation leaves in place the deductibility of mortgage interest and local property taxes, but starting next year, taxpayers will have the amount they can claim for those and other itemized deductions reduced by 3 percent for every dollar of income above $100,000.

Real estate-related deductions will become slightly less valuable to those at the upper end of the income spectrum.

For families with incomes below $100,000, however, the full amount of their mortgage payments and property taxes will remain deductible.

"Many people will be paying higher taxes and getting less deductions," said Jeffrey Perone, a tax partner in Deloitte & Touche, one of the nation's largest accounting firms. "The higher your income, the bigger the bite."

Others said the 1991 tax law changes will do more to weaken than support real estate markets that have already slumped into recession.

Some provisions of the tax code and federal budget that for yearshave been supporting low- and moderate-income housing, which had been threatened with elimination in 1991, survived the congressional ax.

One is the mortgage revenue bond program, used by most states to raise capital through tax-free bond issues, with the funds used to make low-interest mortgage loans available to low- and moderate-income home buyers.

Another federal program that was targeted for elimination by some in Congress was the Low Income Housing Tax Credit, offered since 1986. The program has attracted dozens of corporate sponsors into low-income housing development by offering them credits that can be used to reduce their corporate income taxes.

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