Battle over the mortgage interest deduction

WASHINGTON - Feb. 15, 2011 - President Obama's budget proposes a lower mortgage interest deduction (MID) for high-income families, but the National Association of Realtors® (NAR) plans to fight any change, and a number of lawmakers who view it as a way to raise taxes also plan to oppose the increase.

According to testimony presented by the National Low Income Housing Coalition to a bipartisan deficit reduction commission, only about one-third of taxpayers itemize deductions. The commission later recommended that the deduction be changed to a 12 percent tax credit, with only interest on a debt up to $500,000 eligible.

In Washington, however, any change to the mortgage interest deduction faces an uphill battle. NAR and other groups have already planned a lobbying and education campaign, and a number of lawmakers oppose any move that makes homeownership less desirable.

"Recent progress has been made in bringing stability to the housing market and any changes to the MID now or in the future could critically erode home prices and the value of homes by as much as 15 percent, according to our research," 2010 NAR President Ron Phipps said in an earlier statement. "This would negatively impact homeownership for millions of Americans, including those who own their homes outright and have no mortgage. Any further downward pressure on home prices will hamper the economic recovery, raise foreclosures and hurt banks' abilities to lend and likely tip the economy into another recession resulting in further job losses for the country. It will effectively close the door on the American dream."

NAR says it "will remain vigilant" in its effort to oppose any move to remove or modify the current mortgage interest tax deduction.

© 2011 Florida Realtors®