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Mortgage Tax Deductions Could Soon Be Up For Debate

August 23rd

tax deductionThe recent federal debt ceiling compromise created an unusual mechanism – an evenly split, bipartisan committee – that, in the next hundred days, could potentially be calling for major cutbacks on real estate write-offs.

Why Now?

Though for decades the homeowner mortgage deductions have been considered politically untouchable, they are now up for debate. Why? Sheer size is the number one reason. The Congressional Joint Committee on Taxation estimates that the home mortgage interest deduction will cost the federal government approximately $100 billion during fiscal year 2011 and a further $107.3 billion in 2012. Between 2008 and 2012 alone, the cumulative write-offs are projected to total just under half a trillion dollars.

All Sides Prepare to Fight for Housing Write-Offs

All it would take is a single vote by a lone senator or House member to put the mortgage interest deduction into serious play. It would then take a majority of seven votes for the committee to make any changes.

Analysts suggest that a compromise agreement among these diverse committee members might have to involve new revenue. The mortgage interest tax deductions would then be one of the easiest cuts to make. In fact, lobbying groups who seek to preserve housing write-offs are already gearing up to fight for this issue on Capital Hill.

The National Association of Realtors recently sent an urgent alert to its 1.1 million members, urging them to lobby their Congressional representatives on the importance of preserving real estate tax provisions.

Defenders of the write-offs argue that high levels of homeownership are essential to economic growth and social stability. These factors, in their opinion, fully justify the existence of real estate tax deductions. National opinion polls also regularly demonstrate widespread support for these deductions, even among renters.

On the other hand, many of the deduction’s critics see such write-offs as inherently unfair. Critics argue that the mortgage tax deductions are skewed to disproportionately benefit upper-income owners and are highly concentrated along the west coast, northeastern states and mid-Atlantic regions.

 

 
 
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