My Real Estate Blog

For months now, experts have been debating the fate of the home mortgage interest deduction. Why exactly are politicians targeting the deduction? With a federal deficit of around $13 trillion, officials are hard-pressed to find ways to curb the growing the debt.

The deduction, a pillar of the housing industry since 1913, could be on the chopping block. The Obama administration's deficit committee is currently reviewing it, along with other items, in order to scope out new ways to help reduce our budget shortfall.

The co-chairmen of the White House's bipartisan deficit-reduction commission said Tuesday they would propose a significant paring of popular middle-class tax breaks, including the mortgage-interest deduction, and push for an increase in the Social Security retirement age.

Some say there are better options available than keeping the mortgage deduction, following suit of many European nations who have in recent years nixed the deductions themselves. The National Association of REALTORS disagrees. They feel that this deduction is a strong incentive for homeownership. For nearly 100 years homeowners have been allowed to deduct the interest paid on mortgages for their primary residences, second homes and most home equity lines of credit.

The tax deductibility of interest paid on mortgages is a powerful incentive for home ownership and has been one of the simplest provisions in the federal tax code for more than 80 years. In a new survey commissioned by NAR and conducted online in October 2010 of nearly 3,000 homeowners and renters, nearly three-fourths of homeowners and two-thirds of renters said the mortgage interest deduction was extremely or very important to them.

Will Washington continue to allow taxpayers who own their homes to reduce their taxable income by the interest paid on the loan? Time will tell. It is dependent on finding alternative ways to curb growing anxiety over our growing debt.