A new policy could cap income tax deductions at $100,000
One of the many upshots of owning a home is that mortgage interest payments are tax deductible. They are for now, at least.
CNBC reports that the new administration may seek to lower the cap on the mortgage interest deduction, a move that realtors and builders oppose. The deduction is often used as a selling point in helping to convince renters to buy.
Deductions are already capped at $1 million for married couples who file jointly and $500,000 for those who file separately. Steve Mnuchin, who was recently tapped to become the new head of the Treasury Department, said that the new administration could limit deductions at $100,000.
A cap at that figure probably wouldn’t affect most homeowners, though. A $500,000 30-year-fixed mortgage at 4.5 percent would only save $10,000 in taxes, for instance. Also, between the low homeownership rate and the sizable share of Americans who either don’t pay federal income taxes or don’t itemize, only 40 million households (22.5 percent) benefit from the mortgage deduction.
Still, housing leaders don’t want to make any drastic changes.
"We would strongly oppose any attempt to limit or eliminate the mortgage interest deduction. Realtors know that the MID is an important benefit not just for the millions of current homeowners who depend on it, but also for renters looking to make the transition into homeownership," said William E. Brown, president of the National Association of Realtors. "We're living in a time of tight credit and low inventory, with homeownership rates hovering around a 50-year low. Doing anything that would make it harder for buyers to enter the market is a fundamental step in the wrong direction."