One of the ideas of raising taxes is re-examining the biggest tax deduction in the U.S. tax code: the $130 billion per year home-mortgage interest deduction.
The threat of removing is the deduction is so big, the National Association of Home Builders (NAHB) created a website to provide information to concerned taxpayers. A recent Time Magazine article summarizes the national debt issue.
Currently, home mortgage interest is any interest paid on a loan secured by your main home or a second home. This includes a taxpayer's primary mortgage, 2nd mortgage, home equity line of credit, or a home equity loan with a limit of $1,000,000 ($500,000 if married filing separately).
This information can be pulled from box 1 of Form 1098 (pdf) and reported on line 10 of Schedule A (pdf).
The fact is the Mortgage Interest Deduction is the biggest reason middle-class taxpayers file Schedule A with their tax return and itemize as opposed to taking the standard deduction – a tax benefit that eliminates the need to itemize actual deductions covered on Schedule A. Currently, the standard deduction for most taxpayers is:
- Married filing Joint / Qualifying Widower: $11,400
- Head of Household: $8,400
- Single / Married filing Separate: $5,700
Sounds like a slam dunk move. Eliminate a tax deduction for the wealthy, increase government revenue, reduce the national deficit. Don't bet on it. The National Association of Realtors (NAR) spent more than $20 million lobbying Congress so expect a fight.