Home ownership is critical to our communities, economy and the quality of life in Kentucky. We need to keep the American Dream of home ownership accessible and affordable for all Kentuckians.

Unfortunately, some in Frankfort are talking about increasing taxes on our homes, new taxes on home sales and putting home ownership out of reach by eliminating the mortgage interest and property tax deductions.

As tax reform discussions escalate, increasing taxes on homes will continue to be included in those discussions. As a result in 2012 the Governor appointed a Blue Ribbon Commission on Tax Reform (see graph at bottom) to make recommendations on the state’s tax code. The recommendations were presented to the Governor in late 2012 which included a variety of tax changes as well as changes that would negatively affect home ownership in Kentucky.

In response The Kentucky Association of REALTORS® contracted with the Center for Business and Economic Research at the University of Kentucky to conduct a study on Kentucky’s tax structure and the effect on housing and the economy. The report stated the following:

  • The impact of a repeal of the state mortgage interest deduction (in Kentucky) will raise the cost of purchasing a home by a consumer. It should be noted that this is, in effect, a much larger increase in tax revenues to the state and hence would have a much larger impact on consumers and the real estate market as a whole.
  • Consider, for example, a $150,000 home with a $120,000 mortgage at 6%. The interest paid in the first year will be about $7154. The maximum income tax rate in Kentucky is 6%, hence the annual increase in tax paid by this consumer could be $429. Over the 30 years of the loan, the net present value of the total interest is $90,494. Again, at a 6% income tax rate (the highest tax bracket) the total (life of the mortgage) tax increase is $5429.

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