While the First Time Home Buyer tax credit has been in the news these days, another bill in Congress could be equally significant, only with negative ramifications. The Congressional Budget Office has been preparing a report that suggests Congress cut deductions for home owner mortgage interest from it's present 1.1 million dollars to $500,000. The deduction would be phased in by $100,000 annually, starting in 2013.
Over a 10 year period, this would increase the revenue by an estimated $41 Billion Dollars. In addition, there are two proposals which aim to replace the mortgage interest deductions with a flat tax credit of 15% of mortgage interest paid. The other proposal is for eliminating deductions for all state and local taxes, which is estimated to cost $862 billion by 2019.

What does this mean for property owners?

Currently, If you're paying $1000 a month for your mortgage, $900 might be interest payments and $100 is paying the actual principal. At the end of the year, you're allowed a $10,800 tax credit. ($900 per month interest x 12 months). However, if this suggestion is undertaken, these tax credits would be eliminated and property owners would no longer receive these write-offs.

Should this legislation pass, it would undoubtedly have a dramatic effect on our unstable housing market.


Joan Rogliano has been practicing real estate for 25 years. She is a Certified Luxury Home Marketing Specialist and a Certified Real Estate Divorce Specialist.

Information and facts taken from Washington Post Writer's Group, Kenneth R Harney.