Mortgage Interest Tax Deduction May Be Cut

October 25, 2010 No Comments »

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The mortgage interest tax deduction, billed as a huge incentive for homeowners, may be reduced to help balance the growing deficit, according to the WSJ.

A bipartisan panel, created by President Obama in February called the “National Commission on Fiscal Responsibility and Reform,” has until December 1 to decide on what to cut to help balance the budget by 2015.

Per commission documents, officials need to find roughly $240 billion in annual savings, which means even seemingly untouchable tax breaks like the mortgage interest tax deduction are in doubt.

Child tax credits and an employee’s ability to pay their portion of their health-insurance premium with pretax dollars are also on the chopping block.

While the mortgage interest tax deduction probably won’t be axed entirely (too much support from home builders and other interested parties), there’s talk of it being cut in a number of ways.

This could include a lower qualifying maximum loan amount (currently $1 million), or an income ceiling.

Most Support Mortgage Interest Tax Deduction, But It’s Costly

Most homeowners and renters support the mortgage interest tax deduction, but it’s estimated to cost the government roughly $100 billion this year.

The other homebuyer tax credits, which have since expired, came with a $22 billion price tag, making an extension unlikely.

Both mortgage points and mortgage insurance are also tax deductible if certain conditions are met.

The White House recently noted that the budget deficit for the last fiscal year was $1.3 trillion, the second highest in the past 60 years.

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