There are easier ways to reduce one’s tax bill. But for many American taxpayers, this is the big one: the deduction for interest payments on home mortgages.
Homeowners in the U.S. last year received a total of roughly $70 billion in federal tax breaks through the deduction. But discussions in Congress about a broad tax overhaul are heating up, and all sorts of tax deductions—including the mortgage-interest deduction—are being discussed by both parties.
Supporters of the mortgage-interest deduction say it encourages homeownership and gives the middle class a better shot at financial security. The deduction helps middle-income purchasers by making their mortgage payments more affordable and by helping these families build equity in their homes.
But critics say the deduction mainly benefits those with higher incomes. They say that it does nothing to help lower-income Americans who rent. In addition, they argue, in these tough budgetary times the government could put the forgone tax revenue to good use.
So far, much of the discussion about changing the mortgage-interest deduction has focused on reducing its benefits for the wealthiest Americans. President Barack Obama has supported clipping the deduction for taxpayers in the top two tax brackets.
More recently, Rep. Dave Camp, a Michigan Republican, proposed a tax-overhaul that would, among other things, lower the limit on home mortgages that qualify for the deductions to $500,000 of principal from the current $1 million.
Arguing to keep the deduction in its current form is John C. Weicher, director of the Center for Housing and Financial Markets at the Hudson Institute. Bruce Katz, vice president and director of the Metropolitan Policy Program at the Brookings Institution, argues that the deduction needs to be revamped or replaced.
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By: Katz, Bruce. ”Should Congress Limit the Mortgage-Interest Deduction?”
WSJ.com. 03/16/2014. Web: Should Congress Limit the Mortgage-Interest Deduction? – WSJ.com.
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