Mortgage Interest Deductions – proposed changes

What is the fundamental issue?
Individuals are permitted to deduct mortgage interest paid on mortgage debt of up to $1 million. The deduction is available for interest on mortgages for a principal residence and one additional residence. The $1 million limitation represents the combined allowable debt on two residences. Mortgage interest on up to $100,000 of debt on home equity loans or lines of credit also qualifies for the deduction.
NAR Policy:
NAR opposes any changes to current law.
Legislative/Regulatory Status/Outlook:
On Thursday, February 26th, 2009, the Obama Administration released an overview of its FY 2010 budget plan. The detailed, full budget proposal has not yet been published. Among proposed budget items is a provision that would reduce the rate at which high-income taxpayers – those whose family income is $250,000 ($200,000 for singles) or more – would benefit from itemized deductions. Currently, taxpayers in the 33% and 35% income brackets are able to reduce their taxes through deductions for mortgage interest payments, charitable contributions, local taxes and other expenses by 33 and 35 cents, respectively, on the dollar. Under the Administration’s proposal, these individuals would only be able to reduce their tax bill by 28 cents on the dollar. The Administration estimates that the change would raise $318 billion over the next 10 years, and has targeted the funds for planned health care reforms.While NAR has supported and applauds the efforts of the Obama Administration in taking aggressive measures to stabilize both the housing market and the nation’s economy, NAR expressed its concerns with the proposal’s impact on housing values and the pace of economic recovery in letters to President Obama and Members of the House of Representatives and Senate.
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