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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
Tina
July 18, 2012 at 4:28 pm

So we give favors to those who don't pay their bills and punish those who do. Not to mention you are adding fuel to the fire for those who are underwater but can still afford their payments and stay in their home. If you do this, they will walk away making the housing crisis worse.

guitarplayer2006
July 18, 2012 at 2:39 pm

Here is what I would do: 1)your withholding tax is your tax--period. It could be based on % of income per individual, not spouse/children/etc. NO refunds based on anything and taxes based on income--for example %100K or less, % $200K or less, etc. 2)eliminate the earned income credit--that is giving money back to people who pay little--if any taxes but still get a refund. 3)OR--go to a national sales tax and eliminate the income tax altogether (my favorite). 4)Corporations pay based on gross income if it does business in America--thus foreign corps must pay up if it does business in this country.

dave b
July 18, 2012 at 1:46 pm

My policy would read like this:

Maintain deduction for principal residence for mortgages under $1 million.

Reduce deduction for vacation homes or second residences over time.

Maintain deduction for boats and RV's claimed as second homes if those items are built in US. We don't want to kill the recreational vehicle and boat manufacturing businesses.

Limit deduction to two residences.

stevek11
July 17, 2012 at 11:07 pm

By all means, lets punish homeowners that are CURRENT on their mortgage payments.

Joe
July 17, 2012 at 8:01 pm

Why not comprimise? Reduce the mortgage deduction on mortgage values from $1million to $750,000, not $500,000. At the same time, raise the income taxes on Millionaires earning greater than $25Million. The newer millionaires aren't hit as hard and the richer ones can more easily pay more. As for playing the stock market - day traders should be taxed more too. On the flip side - Welfare parents should be drug tested before getting their food stamps. And when they do get food stamps - the stamps should only be used for food. No booze, cigarettes and junk food. And speaking of Junk food - impose a Junk Food tax. That's a great revenue source. Fat, unfit folks who waste away eating cheeseburgers and milkshakes all day, add a $.50 tax for each "Meal Deal" they buy. Have that tax revenue go to help pay for Welfare.

MirekCalifornia
July 17, 2012 at 7:47 pm

What a joke with the inheritance tax, you work all your life, pay taxes e.g. income, property, improvement etc. and at the end when you die and lead this to your children or grandchildren the government which has nothing to do with your hard work will take it away by imposing prohibitive tax which Obama wants to raise after November if he wins!!! This is all more than ridicules!

william pisarelli
July 17, 2012 at 5:54 pm

Instead of all the foreign aid to Pakistan , Egypt ,Libya , etc , these funds to be used to give us a break .

Gary
July 17, 2012 at 12:11 pm

Our current tax codes are nothing less than a slow death to America. A simple sales tax only for ALL and the elimination of the IRS will be a true Middle Class fairness issue. We can down size the goverment employment by 200,000 and use that money to create a real jobs recovery. Stop the stealing from one goverment group to cover another.

Charles Kimble
July 17, 2012 at 10:30 am

What I have never understood is the refund. Your company withholds funds (taxes) from your paycheck and pays your income tax. Instead of saying thank you and conducting business with it the federal govt. turns around and sends billions back to people as refunds. Example: my two stepsons worked parttime and made just enough to have to file. The federal govt. in return sent back what they had payed in as tax during the year. I have companies I've done business with that require a deposit that often times is not returned if the order is cancelled. That is just part of doing business. The govt. could save a lot if they said we no longer give refunds. Your W-2 is only a receipt of what has been paid by an individual for that year. No additional filing is necessary for anyone who does not qualify to fille the long form for qualified deduction.

Allen
July 17, 2012 at 4:14 am

All these programs were a joke. We have friends that called about the programs and they were told they did not qualify. Also you had to be late for 2 or 3 months before you could even come close to getting in this program then the bank had the option to say no and reject the offer. What joke the banks has the right to reject you getting a lower rate and dropping your payment lower so you can save your house after all they did. What we all should do is walk away from our mortgages and see how they like it. classifieds