Mortgage Interest Deduction is at Risk of Elimination

8 07 2011

With the recent downturn of the economy, Congress is evaluating several measures to stabilize and restore economic growth.  One such measure is to eliminate the mortgage interest deduction.  This deduction is considered to be a core benefit of home ownership, so the threat of its elimination is very concerning.  Presently, individuals are able to deduct the interest on mortgage debt up to $1 million on a primary residence and a secondary one combined.  One can also deduct interest on a line of credit up to $100,000.

The mortgage interest deduction can be traced all the way back to 1894, but despite the fact that the mortgage interest deduction has been part of the federal tax code for over 100 years the deduction is suddenly considered to be part of the budget deficit problem.  Supporters suggest that reducing or eliminating the mortgage tax deduction will provide some economic relief to our country.  Historically, there have been opponents who believe that only wealthy homeowners benefit from the deduction and they now advocate that retaining the deduction is far too costly when our national debt is of such concern.  There are many, however, that don’t buy it and deliver a different story.

Several analysts have stated that claims of the mortgage interest deduction primarily benefiting the wealthy is quite a misconception. According to the chief economist for the National Association of Realtors, Lawrence Yun, 65 percent of families claiming the mortgage interest deduction earn less than $100,000 and 91 percent earn less than $200,000. These numbers support the argument that the deduction is beneficial to all homeowners, regardless of their economic classification.

The mortgage interest deduction has become a mainstay in our country. It increases the affordability of home ownership for many and could be considered a key part of housing market recovery. Millions of Americans feel more comfortable buying homes with the understanding that the mortgage interest deduction will lessen the financial burden of owning a home.

“It’s in the national interest to encourage home ownership,” stated Ron Phipps, the President of the National Association of Realtors. “Recent proposals to reduce or eliminate the mortgage interest deduction and remove government support of the housing finance market could have disastrous consequences for the economy, not to mention making it harder or nearly impossible for millions of families to own their own homes. We believe America must continue to invest in home ownership, for the future of our families and our nation.”

This issue has become an active discussion on Capitol Hill and many groups have been created to modify the existing tax system.  As several deductions are under review, there is a greater risk that the mortgage interest deduction will be eliminated or reduced.  If you currently own a home or are considering purchasing a home, and you support the continuation of the mortgage interest deduction, it is critical that you let your lawmakers in Congress know.  Write a letter or email your concerns today.

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