For many Americans, the mortgage interest tax deduction is important for maintaining fiscal health each year. Accounting for nearly 35% of most people’s total itemized deductions, the threat of losing this deduction could seriously impact the future of many families. With the current plan expiring at the end of the year, time is running out for the White House to decide how to proceed.
Regardless of political affiliation, both parties had plans to keep the mortgage interest deduction around for another few years. Thankfully, this is great news for many homeowners and the fate of the housing industry in terms of potential for continued recovery as mortgage debt rates are steadily declining. However, the deduction is likely to see some noteworthy changes in the coming year.
Currently, the deduction allows for homeowners to reduce their taxable income by the amount of interest paid on the mortgage loan. The interest deduction is capped at a $1 million home value, and only applies to principal and second homes, and not on multiple investment properties.
There are several proposed plans for revisions of the deduction, which include items such as:
- A cap of $500,000 home value
- Limiting the deduction to primary residences only
- An overall limit of $25,000 in savings
- Disqualifying taxpayers who earn more than $250,000 annually from eligibility to claim the deduction
There is much to be decided in how the future of the mortgage interest deduction will play out, but one thing is clear; it will be around for another few years. The reason is that nearly everyone agrees that the deduction is important to the stability of the American housing market and economy.