Fiscal Cliff Takes Aim at Mortgage Interest Deduction: CNN

A number of government programs have become ensnared in the fiscal cliff’s cutback net, months before scheduled cuts are even set to occur. The mortgage interest tax deduction is the latest tax break to come under consideration as Washington attempts to narrow the federal deficit by January 1, 2013.

An article from CNN Money urges Washington to stay away from the touching the mortgage interest tax deduction, as getting rid of it would stunt the already struggling housing market’s attempts at full recovery.

Meanwhile, lobbyists such as the National Association of Realtors have garnered millions of dollars to fight Washington’s possible decision of cutting one of the oldest tax breaks designed to encourage home ownership.

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CNN Money writes

Lately, housing is on the mend and one of the few bright spots in a lumbering economic recovery. Taking away a key tax break could throw a wrench into home buying plans and hurt a long-sputtering recovery.

“[Getting rid of it] would throw the housing sector into turmoil…and chill the market just as it is trying to recover,” said Jerry Howard, CEO of the National Association of Home Builders.

Lobbyists from the industry have spent a combined $30 million this year, up from $27 million last year, according to Center for Responsive Politics figures. The bulk of that came from the powerful group, the National Association of Realtors, which spent a record $25 million on lobbying this year, more than any other year, federal records show. 

The deduction is the third largest tax expenditure on the federal budget, according to the Congressional Research Service. The amount of revenue the government would forgo from those claiming mortgage interest deductions is estimated to reach $100 billion by 2014. 

Read the full CNN Money article here. 

Written by Jason Oliva

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    • As of yet the cards are being put on the table.  Secretary Geithner played the extreme cards of the President yesterday.

      The proposals which have been kicked around is to eliminate all itemized deductions, cap them at $50,000 for all taxpayers, cap them only for “the 1%,” and on and on.  Not only the talk was focused on reducing the limit on acquisition indebtedness to $500,000.

      The interesting thing is that no one who is talking about capping itemized deductions is talking about how that will impact alternative minimum tax deductions.  Few of the advocates have any idea of what it is they are proposing let alone its actual impact.

  • As to the deficit, reverse mortgage interest deductions have little to no impact since fewer than 200,000 reverse mortgage borrowers have been able to deduct any home mortgage interest but that does not mean there will be a cut out to preserve this deduction for reverse mortgage borrowers.

    For simplicity, for those who need this deduction, it can be critical.  For most it provides de minimis value.  The trouble is those who need it are by and large not part of that elusive 1%.  The actual cost to a significant number of HECM borrowers particularly their heirs could be enormous.

  • Very interesting in that right now I have a potential client that said the only thing keeping him from the RM is his large annual deduction and if it goes away we’re going to do business.  This could affect more than one RM client out there- his would be a Libor Saver to retire a sizable mortgage that the Saver “just” covers and that he was planning to make scattered payments upon as his disposable cash allowed.

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