Posted on Tuesday, February 23, 2010
On February 1, President Obama released his budget proposal for 2011. Consistent with its proposed FY 2010 budget, the Administration's again has recommended limiting the value of the mortgage interest deduction (MID) for upper income taxpayers by, in effect, converting the deduction to a 28% tax credit for those individuals currently in the 33% or 35% tax brackets.
The mortgage interest deduction has been part of U.S. tax policy since the federal tax code was first enacted in 1913. It is a remarkably effective tool that facilitates homeownership. While only about 30% of all taxpayers in any given year itemize their deductions, more than 3/4 of homeowners utilize the deduction over the period they own their home. For this reason, NAR is 100% opposed to the provision that modifies the MID and prepared to use its formidable array of resources against its enactment.
Under current law, interest paid on up to $1 million of mortgage debt, plus interest paid on home equity loans or lines of credit of up to $100,000 may be deducted. These caps apply to the combined indebtedness on a principal residence and one additional residence. As currently drafted, the Administration's proposal would change the MID by reducing the economic benefits of mortgage deductibility for families earning over $250,000 (AGI) and on single taxpayers earning over $200,000 - NAR