An update: The NCFRR report referenced below did not receive enough votes to be considered by Congress, so proposals will continue to be considered.
The Mortgage Interest Deduction is Under Attack
American voters have a clear message for Congress: “Don’t touch my mortgage interest deduction!” However, a recent draft proposal released by the co-chairs of the National Commission on Fiscal Responsibility and Reform (NCFRR) threatens this deduction that often provides thousands of dollars of tax savings each year to American home owners.
The NCFRR undefined a bipartisan commission created by President Obama to help address the nation’s budget deficit undefined recommends either eliminating the mortgage interest deduction altogether or severely limiting it among many other changes. This means many home owners could have a much higher tax debt each year than they are used to, which could have a serious negative impact on their family’s financial situation.
Currently, the mortgage interest deduction allows home owners to reduce their taxable income by the amount of interest paid on their home loan each year. Home owners can deduct the interest for up to $1 million of mortgage debt and up to $100,000 of home equity loan debt on both primary and secondary homes that aren’t rented out.
A recent nationwide survey of 800 likely voters commissioned by the National Association of Home Builders (NAHB) shows that no matter their political party affiliation or homeownership status, Americans don’t want their mortgage interest deduction to be taken away.
Here are some important results of the survey:
Critics of the deduction argue that it favors high-income taxpayers over lower to moderate income earners who need it most. But according to the Joint Committee on Taxation, 89 percent of taxpayers benefitting from the deduction make less than $200,000 annually.
Research by NAHB economists undefined using the Internal Revenue Service Statistics of Income data undefined also shows that as a share of household income the biggest beneficiaries are younger households, who typically have large mortgages, small amounts of equity in their homes and growing families. A copy of the report can be found at www.nahb.org/TaxIncentivesStudy.
Current home owners rely on the mortgage interest deduction to help offset the costs of homeownership each year and prospective buyers take the deduction into consideration when choosing homeownership over renting. Any change to the tax code that limits or eliminates the deduction will negatively affect homeownership in America.