Obama Commission Fails to Send Mortgage Tax Deduction Limit to Congress

The President’s National Commission on Fiscal Responsibility and Reform voted 11-7 in support of the groups official report on Friday.  While supported by Democrats and Republicans, it’s three votes short of the 14 vote mark required to send the report to Congress.

The commission recommended scaling back the mortgage deduction which currently stands at $1 million for principal and secondary residences, plus an additional $100,000 for home equity.  The new proposal would make a 12% non-refundable tax credit available to all taxpayers and cap it at $500,000 on their primary residence.

The proposal was met with resistance from real estate and mortgage trade groups like the Mortgage Bankers Association, National Association of Realtors, and the National Association of Home Builders (NAHB).


“While we commend the hard work of the President’s deficit commission to improve the nation’s fiscal situation, this is simply the wrong approach to the problem. It would put a huge tax increase on millions of middle-class home owners by eliminating or devaluing the mortgage interest deduction,” said Bob Jones, Chairman of the NAHB.  “The consequences would be devastating for housing and the economy. This would further depress home prices, putting countless more home owners underwater and triggering a new wave of foreclosures.”

The NAHB even launched a new website SaveMyMortgageInterestDeduction.com to provide the latest information on the threat to the mortgage interest deduction.

The President praised the work of the commission and vowed to study its recommendations closely as he puts together his 2012 budget proposal. He also urged Democrats and Republicans to work together to solve the country’s deficits and debt.

“Jobs and growth are our most urgent need,” Obama said, on a day when the Labor Department reported a rising unemployment rate. “But if we want an America that can compete for the jobs of tomorrow, we simply cannot allow our nation to be dragged down by our debt. We must correct our fiscal course.

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  • I am just relieved to hear about the news above. I just purchsed my first home by myself and the interest deduction really helps especially for those who owns a home and depends on a single income. If they will continue to pursue this proposition, this will truly affect the working and/or middle class. At a certain point people will resort to renting an apartment/house for they will soon realize there is no point of owning a home. I hope the NAHB, MBA and NAR will continue to defend the benefits of home ownership. There are other ways to address or resolve the national deficit.

    • Mary,

      You need to sit down and compare the proposal to current law. Most recent home buyers will find they come out about the same or better under the proposed change. That is particularly true for the latter part of the loan as the deductible portion of the interest is getting smaller and smaller. It would even be better for those specific taxpayers if it was clear that unused credits could be carried backward for a number of years and forward until fully utilized. The proposal would be better for almost all seniors who currently have mortgages.

      Because of personal opposition to the tax portion of the proposal, this comment is difficult to write although some tax provisions need to be eliminated or at least greatly curtailed as a means to help with deficit reduction and for other purposes. The timing of a radical change to the interest deduction (or for that matter to itemized deductions generally) just does not make economic sense right now. We need a recovery and stability in the housing industry not a period of adjustment to tax law restructuring in that area.

      The 1986 Tax Reform Act and the Omnibus Budget Reconciliation Act of 1987 wreaked havoc in the housing industry for the following decade here in California and in many other areas of the country. Do we want to see our current housing problem extended an additional decade? The combined impact of the proposed changes in tax law would most likely help extend the current housing disaster for years, if not an entire decade.

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