As a new Congress meets this spring, they’ll begin debate on the potential elimination of the mortgage interest deduction… in a continued effort to reduce the federal deficit.
This is at minimum a poorly timed idea… and would place additional burden on an already depressed housing market. Members of the Federal Deficit Reduction Commission are considering -
- Restricting the mortgage interest deduction to principal residences only. Therefore, second homes and home-equity loans would no longer qualify.
- Capping the qualifying mortgage amount to $500k (the current amount is $1 million).
- Converting the mortgage interest deduction to a 12 percent non-refundable tax credit.
The mortgage interest deduction has been a powerful incentive for home ownership for nearly a hundred years… with mortgages being the largest loan most people take out during their entire lives. Tampering with the mortgage interest deduction at this critical time in the housing market could put additional pressure on an already disheartened recovery. The suggested changes would at minimum make the dream of homeownership less appealing to buyers.
As stated by NAR President Ron Phipps - “Any further downward pressure on home prices will hamper the economic recovery, raise foreclosures and hurt banks’ abilities to lend and likely tip the economy into another recession resulting in further job losses for the country. It will effectively close the door on the American Dream.”
So whether you currently own one or more homes or are looking to buy, keep an eye on Washington… more reports coming. For more on this subject go to Another Challange to the Mortgage Interest Deduction.
