The Deficit Reduction Commission report, released last month by a bipartisan commission, suggested trimming the mortgage interest deduction (MID).
Currently, mortgage interest is deductible for itemizers with the mortgage capped at $1 million for principal and second residences plus an additional $100,000 for home equity loans.
The report proposes a 12 percent non-refundable tax credit available to all taxpayers (rather than a deduction), with eligible mortgages capped at $500,000 and no credit for interest from a second residence or equity loan.
The National Association of Realtors immediately sprang into action to “warn Congress of the potentially devastating effects of such a change on American Families and the economy,” according to their web site. Part of this effort is an ad in several prominent Capitol Hill publications that reads:
Repealing the mortgage interest deduction (MID) is a form of tax increase. Families with children would bear more than half of the total increase.
IRS data show that taxpayers in the 35 – 45 age group take the largest MID on average compared to any other age group of taxpayers.
First time home buyers would be hurt the most if the MID is curtailed.
Current data from the IRS show that 65% of the taxpayers who have claimed the MID made less than $100,000.
The housing market has not emerged from the crisis that began in 2007.
Congress: The Facts Speak for Themselves
The 1.1 million members of the National Association of REALTORS® strongly oppose proposals to reduce the mortgage interest deduction (MID). Hard-working American families’ budgets are already stressed. Reducing or eliminating the mortgage interest deduction would pull even more money directly out of their wallets. If this crucial deduction is eliminated or reduced, home values will further erode. That’s something America simply can’t afford in this unstable housing market.
According to an analysis in the Christian Science Monitor, the current deduction is the second most expensive tax subsidy, expected to cost the US Treasury $104 billion in 2011. Many economists and budget watchers have long viewed it as a form of wealth transfer to the rich, since they benefit the most.
Will the MID remain on the table? It will certainly not remain there quietly. We’ll keep this topic on our radar, so log in for updates.