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Property Related Taxes on the Rise in Massachusetts

Property taxes are on the rise in Massachusetts. Various municipalities around Massachusetts have started raising residential property tax. Take Needham, for one. Property taxes on single family homes will increase by around $340, reports The Boston Globe.

Wellesley isn't spared, either, with property taxes going up by approximately $247 on the median single family home. But that's not the only area of concern for homeowners.

With all the talk about the fiscal cliff, many are asking about the state of the mortgage deduction. That's a tax break available to homeowners whereby they can deduct their interest payments on their mortgage.

For many taxpayers, it's a huge incentive to buy a home. But with the looming fiscal cliff, legislators on both sides of the aisle are questioning whether to keep this tax break going.

After all, it costs the government $100 billion each year, writes Reuters. Currently, a homeowner may deduct all interest payments on any mortgage, up to a total of $1 million, assuming the taxpayer is married and filing jointly. This deduction is available on mortgage debt secured by the first or second home.

The mortgage tax deduction and the property tax are two separate things, however. One isn't related to the other, although property taxes are deductible on the federal income tax return.

Property tax is largely left to the states, counties and municipalities. So typically, it's the county or city that sets the property tax rate. Income tax credits and deductions, however, are the domain of the Internal Revenue Service and the IRS abides by laws enacted by Congress.

In any event, a rise in tax could hamper the recovery of the housing market. While an incremental rise in property tax won't have as much effect, removing the mortgage interest deduction could hugely impact the desire of people to purchase new homes.

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