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An end to mortgage deductions?

By Judy Martel · Bankrate.com
Thursday, July 12, 2012
Posted: 8 am ET

With job growth and the economy as central campaign themes, presidential candidate Mitt Romney and President Barack Obama are putting forth very different tax plans. Both could spell doom for some popular breaks, including the mortgage interest deduction.

Romney hasn’t provided all the specifics on his plan, but says it will reduce all individual income tax rates by 20 percent. The top individual rate would drop from 35 percent to 28 percent and the corporate rate from 35 percent to 25 percent, a move he says will unleash economic growth. The Tax Policy Center in Washington released a report yesterday saying the tax reductions will require eliminating some breaks. In 2015, according to the report, Romney would need to ax $320 billion in tax breaks, or 30 percent of the total, to pay for his plan.

Obama's plan includes raising taxes on incomes above $250,000. A bipartisan panel appointed by the president to recommend ways to reduce the national deficit suggested eliminating the mortgage deduction or reducing the limit from $1 million to $500,000.

Currently, individuals typically itemize if their deductions exceed the standard deduction of $5,800 for a single taxpayer, $11,600 for couples filing jointly, or $8,500 for head of household. According to a congressional report by the Joint Committee on Taxation, about half of U.S. households take advantage of the mortgage deduction. With its current limit of $1 million of the mortgage value, it overwhelmingly favors wealthy taxpayers. Most average taxpayers fall within the standard deduction amounts.

The Joint Committee on Taxation also reported that the mortgage deduction cost the U.S. $90 billion in revenue in 2010.

Do you believe that either Obama's or Romney's tax plan will help spur the economy and reduce the national deficit? Are you willing to possibly give up the mortgage deduction in exchange?

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151 Comments
Jim Wynn
September 04, 2012 at 4:47 pm

Why not cut out all deductions and let everyone pay taxes on total income. Then the rate could be reduced to something more sensible.

Becky
August 29, 2012 at 6:48 pm

The very rich don't have mortgages, they own all of their properties outright. Getting rid of the mortgage interest deduction does nothing to help close loopholes on the rich and only increases the burden on the middle class.

who knew
August 21, 2012 at 8:25 pm

The interest on my modest home is a couple grand a year. After looking at the list of wealthiest members of congress with their multiple million plus mortgages I say now is the time to do away with the deduction. We can use it as a bargaining chip to get larger loopholes plugged. I know it will hurt me a little but if we play our cards right we can get the 13 %'ers to come closer to paying their fair share. Housing values should not be effected much as they don't have much more room to fall if you look at the high cost of replacement. I say we do it but only if we get big concessions in return.

Pat
August 19, 2012 at 1:15 am

TAX and SPEND...........I'm sick of it !! VOTE THEM OUT OF OFFICE !!!

Ralphy
August 18, 2012 at 5:03 pm

Why are people so stupid as to listen to anything these two guys have to say. Don't throw your vote away, vote for someone else this upcoming election.

Ralph Wilcoxson
August 16, 2012 at 1:54 pm

I have always been able to use the mortgage deduction as a means to reduce my taxes. The standard deduction is getting closer to helping but is not yet as high as my itemized deductions. I would be glad to give up the mortgage deduction in exchange for a simpler, understandable tax code! I am a middle income taxpayer!

n.worbilla
August 15, 2012 at 8:04 pm

How much more basic can a need such as housing be??
The American Dream. Owning a patch of earth and a humble abode... Home ownership is a goal on the way to fundamental dignity. For many of us, a mortgage is our largest expense and the most important deduction we can take on our taxes.
I have not yet been rich -or even slightly comfortable- and as retirement looms on the horizon, that likelihood is much diminished. I've taken a beating on the value of my home, yet the mortgage payment remains unchanged. Many have lost their homes in recent years and have little hope of ever owning again. Still others cling tenaciously, white-knuckled, in their quest to not lose the one thing that represents some kind of security in these crazy times.
That mortgage deduction on my taxes has made a difference, each year, over the possible standard deduction - not much, but some... and a little more helps.
Taking away the mortgage deduction would be wrong, whether the rising standard deduction covers some homeowners, or not. Why penalize those who CAN take the deduction? If one does have other deductions to take, folding in a mortgage deduction makes sense. There should be a choice.
Home ownership, especially now, should be encouraged. Retaining the mortgage deduction is a large part of that encouragement, and as such, should not be tampered with.

Juan A. Pacheco
August 15, 2012 at 1:47 pm

I'm sorry to say but, Biden Has "NOTHING" constructive to say.

John Gilmer
August 06, 2012 at 9:44 am

The federal government is indirectly reducing the mortgage deduction by increasing the amount of the "standard deduction" (SD.)

If you take the "standard deduction," you can't itemize.

Folks with a modest home that's already partly paid off and who don't give much to charity or church may find that the SD is greater than what they paid in interest.

In particular, "first time" home buyers should be aware of the effect of the SD before swallowing whole the hype that mortgage interest is "deductible."