Tax deduction for mortgage interest could be on the chopping block

[NNN0LHI]

http://www.chicagotribune.com/business/la-fi-mortgage-deduction-20101220,0,3432138.story

It's been around since 1913, but its time may be up. Such a change would generate billions of dollars in federal revenue that could be used to cut the deficit while inflicting little pain on most middle-class homeowners.

By Don Lee, Los Angeles Times

December 20, 2010

Reporting from Washington — Fifteen years ago, Carol Nietmann and her husband bought a spacious house in Maryland near Chesapeake Bay. And thanks to the time-honored tax deduction for mortgage interest, she said, their new place was a little bigger and a little nicer than they would otherwise have thought they could afford.

Much the same has been true for millions of Americans up and down the income scale. Perhaps the most sacred of all the sacred cows in the tax code, the home mortgage deduction has long been seen as crucial to a major element of the American dream — owning your own home.

It has also been a boon to home builders, construction workers, the financial services industry and local governments that benefited from fatter real estate tax revenue.

But nearly a century after coming into existence, the mortgage deduction may face a day of reckoning. Although out of the spotlight while the lame-duck Congress thrashes to an end, the mortgage deduction issue is likely to resurface next year when the new Congress — including a lot more deficit-hawk Republicans — takes over.

[Jackpine Radical]

1. Well maybe the Reptilians can soften the blow

on their important constituents by retaining the exemption for mortgages over 5 million or something.

[Poboy]

5. Thats just the type of legislation we can expect from these criminals.

Save the exemption for the millionares, but hit joe average with the tax.

[Jackpine Radical]

32. Maybe there should be subsidies for mortgages over 10M

I mean, otherwise how can you expect people to keep up with their payments? And don't forget, many of these unfortunates are saddled with several multimillion-dollar estates. Surely we need to provide help for them.

[shanti]

2. mortgage credit certificate

i wonder if is included here. i have one and would hate to lose it as it's almost 1200 off my taxes with it.

[GainesT1958]

3. They won't be able to do it...

The last thing most of the Repub presidential wannabes want to see Barrack bludgeon them with in 2012 is something along the lines of: "The Republicans in Congress wanted to take away YOUR mortgage interest deduction...but I didn't let them. How many of those guys running against me still want to do it, and raise YOUR taxes in the process?"

Two can play that "raise your taxes" accusation game...

B-)

[montanacowboy]

4. While inflicting LITTLE PAIN????

How about $14,000 a year of little Pain? No point in owning a home if this goes away. Renting would be much better deal, let the landlord fix anything that goes wrong, no paying high cost home insurance, no paying property taxes or anything else connected with being an owner.

This will put a final nail in the coffin of home ownership.

[Poboy]

6. 'Little pain" indeed. I agree. Its absurd.

[NNN0LHI]

7. Property taxes have put the final nail in the coffin of home ownership for me

After I finish paying this house off in a few years the monthly amount I will need to pay for the property taxes alone will be more than my entire mortgage payment was when I bought this house. And that initial mortgage payment used to cover the property taxes, insurance, principle and interest.

Welcome to the club.

Don

[dmallind]

10. Renters pay for all those things and profit too

You think the landlord doesn't include his property taxes (in many states higher than owners' unless he homesteads) repairs and insurance etc costs in his cost basis when setting rents?

That's like saying when you rent a car you are not paying for the tires.

[Kalyke]

25. Yup... and without those property taxes, where are local

governments going to get the money to hire cops, fireman and teachers or build roads..

Oh...wait... that might be the point.

[Egnever]

8. Chicken little BS

Anyone that thinks they are going to remove that tax credit while in the middle of a still collapsing housing market is smoking some great shit.

[hayu_lol]

9. There was a time when we could deduct...

credit card interest as well. Going the way of the Dodos.

[NNN0LHI]

11. Lot of people still deduct credit card interest

They take out a second mortgage on their home to pay off the credit cards and then get the deduction.

Don

[Poboy]

14. Bad move, imo. Never exhange unsecured debt for secured debt.

[unblock]

29. never say never, there's a price involved.

you're talking about credit card debt when the average interst rate is over 14% (http://www.creditcards.com/press-releases/CreditCards-Weekly-Credit-Card-Rate-Report-December-15-2010.php) and a heloc can be about 10% lower (http://www.mybanktracker.com/heloc) AND are tax deductible.

that's potentially a huge savings.

yes, the risk of losing your house must be considered, but it might well be worth it.

[treestar]

16. Agreed. Really digging for the outrages now.

[stray cat]

12. Why not?

[EV_Ares]

13. I enjoy the home mortgage tax writeoff for our home but have always felt it was something

that really should not be. However, they will have their battle getting it done with the Real Estate Lobby one of the strongest in DC. That said, it should be done away with and I have always felt basically, it is one of many things with our tax code that needs to be eliminated along with the estate tax and other items. The entire tax code needs to be redone to where it is fair all the way from the rich down to the poorest walking on our land. That is the trickle down we need.

[kath]

37. You want to eliminate the estate tax?!?!

WTF?

[EV_Ares]

38. Yes, eventually as other tax issues and loop holes. However, you don't do it

until you have something in place for it such as the tax code itself fixed.

[KansDem]

15. "...including a lot more deficit-hawk Republicans ..."

Who are completely copacetic with putting two bogus wars on the national credit card...

This really infuriates me! :grr:

[msongs]

17. meanwhile the bloated US military continues to be the world's biggest wefare scam nt

[Recursion]

18. Good. I'm tired of subsidizing homeowners

:hide:

But seriously. Why have that?

[Missy Vixen]

21. I'm tired of subsidizing those with children, too

:hide:

If the government wants to see the housing market explode in such a way it will take another generation to recover, please eliminate the mortgage tax deduction.

:eyes:

[Recursion]

24. I'd love for housing prices to collapse

Then I could finally afford a house without going massively into (subsidized) debt.

[Missy Vixen]

30. That would also mean a completely collapsed economy

Cheap houses, but hey, the starvation and everything else might be a real bitch.

[Recursion]

31. Why would returning to sane house prices destroy the economy?

It's a durable item that deteriorates, and more are made every day. Why should prices be going up, ever?

[Missy Vixen]

34. What do you define as a "sane" house price?

I'm also curious to know how you would make up for the losses in property taxes paid.

[Recursion]

35. Since wages have been stagnant for 30 years...

...the house prices of 30 years ago sounds pretty good. I could afford that.

[Still a Democrat]

19. It's regressive in nature - I say repeal it

If we get rid of the mortgage-interest deduction, about 22 percent of people in the 40th through 60th income percentiles will pay higher taxes —on average $215 a year, or about half a percent of current after-tax income. For those in the 60th through 80th percentiles, only 45 percent would see their taxes go up—by an average $689, about 1 percent of after-tax income. While there are tax hikes, they’re fairly small in relative terms, and what’s more, less than half of people in these income groups would have to pay them. And below the 40th percentile, almost no one would be affected by repealing the mortgage-interest deduction.

The impact is more substantial farther up the earnings ladder. In the 90th through 95th percentiles, for example, 74 percent of people would see their taxes rise, costing them an additional $2,643 per year on average, about 1.75 percent of their after-tax income. It’s true that repealing the deduction would (in relative terms) have only a small impact on the top 1 percent of earners, but that’s largely because, as AaronW noted in the comments thread, “for the truly wealthy, mortgage debt is a much smaller proportion of their income than for middle income earners.”

From the numbers above, it’s clear that the benefit derived from the deduction is almost perfectly increasing with income. Low- and middle-earners are less likely to itemize their returns, which makes them unlikely to benefit from the mortgage-interest deduction. And because they make less money, they pay taxes in a lower bracket—meaning that every dollar in deductions reduces their tax bill by less than it would for someone in a higher bracket. Calling the mortgage-interest deduction a middle-class tax break essentially requires us to define someone in the 80th or 90th percentile of earnings as middle class. But they’re not; when you make more than 80 percent of the country, you’re rich, even if you don’t want to admit it.

http://www.tnr.com/blog/jonathan-cohn/79206/the-mortgage-interest-deduction-really-middle-class-tax-break

[Ganja Ninja]

27. As a renter I'm for it too.

If they're planning on lowering taxes across the board and eliminating it I'm all for it. The people who benefit the most from it are people that own more than one home.

[Angry Dragon]

20. If the mortgage deduction would be eliminated

then you would really see the economy tank
this country would never recover

[Donnachaidh]

22. Trade it -- give us back the tax deductions for credit card interest

THAT would be a TRUE middle class tax deduction -- AND actually HELP people.

[unblock]

23. i would be thrilled if republicans pushed this. it won't pass and it will cost them votes AND money

sure, the filthy rich will still love them, but there is a huge swath of the income range in america that benefits enormously from this deduction. just TRY to do away with it and even the merely rich will vote for democrats in 2012.

[tabbycat31]

26. Start with eliminating the deduction on a 2nd home

[ItNerd4life]

28. On 2nd mortgages above 500,000, that has been around a while

Nobody is discussing taking it off primary residence.

[FiveGoodMen]

33. You've just got to wonder whether there will be a last straw

Will Americans ever revolt against a government that is determined to make the non-rich poor?

[SoCalDem]

36. For mortgages over a certain amount..or for a 2nd, 3rd home..okay by me

It should be based on some formula between mortgage amount & income

[Liberal_in_LA]

39. nooooo oooo ooooo oooo!

[blueamy66]

40. If this occurs, I'm selling my house

and moving to an apartment.