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.
As part of its FY 2011 budget, the Administration has proposed limiting the value of the MID for upper income taxpayers by, in effect, converting the deduction to a 28% tax credit for those individuals who are currently in the 33% or 35% tax brackets. Individuals with incomes below $250,000 would generally not be directly affected by this proposal.
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 only 28 cents on the dollar. The Administration estimates that the change would raise $318 billion over the next 10 years.
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 has aggressively expressed its opposition to the Administration MID proposal. NAR believes the proposal is ill-timed and ill-advised. It would have adverse impact on housing values and the pace of economic recovery.
Most members of Congress have also opposed the budget proposal. To date, limits on itemized deductions have not been part of the legislative agenda. Note, however, that in August 2009, the Congressional Budget Office (CBO) has released its annual report identifying possible revenue sources. These included several new limitations on MID. The CBO report is NOT legislation; it is more like an academic exercise to explore options. Nonetheless, the report cannot be disregarded.
Call to Action
Email, write or call your legislators with your request of the bill H.Res 25 be passed that leaves the current law governing the Mortgage Interest Deduction in place. A sample wording is below, but please personalize it any way to fit your interests and needs.
Please show your support of stable housing policy by cosponsoring H.Res.25, a bipartisan resolution offered by Rep. Gary Miller. Realtors believe that wide co-sponsorship of this resolution will send a strong signal that Congress remains committed to a housing recovery.
H. Res.25 expresses the sense of Congress that the current law governing the MID must be retained. To restrict current law in any way would undermine progress in the still-fragile housing recovery.
Please join Mr. Miller and your colleagues in sending a strong signal that you support a stable housing market and that you support the current MID rules. Please co-sponsor H.Res.25.
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