Interest Deduction Saved????

POWERFUL LEGISLATOR CLAIMS INTEREST DEDUCTION STILL SACRED

Powerful Legislator Claims Interest Deduction Still Sacred  Topic Summary: With all the talk of cutting the deficit and putting the government on firm financial ground, there have been several attempts to reduce or even eliminate the deductibility of mortgage interest. Congressman Barney Frank, a powerful legislator claimed a few days ago that there are not enough votes to kill the deduction and it will remain "sacred" for the foreseeable future. Current Status:   Homeowners can deduct interest on a mortgage taken out to buy or improve a home if the amount of the loan is less than $1 million for married couples and $500,000 for a single taxpayer. Home equity loans taken out for anything else is capped at $100,000 for couples and $50,000 for singles. (See Mortgage Deduction Facts Video from The National Association of Realtors Below) Recent Activity:  When President Obama released his budget for 2012, the deduction, long considered a "sacred cow" to homeowners came front and center. The President advised an 30% cut to itemized deductions for high-income taxpayers. Other legislators said the deductions should be eliminated and replaced with a 12% tax credit covering all deductions. "The mortgage interest deduction is going nowhere," Congressman Frank said. "The sun will go away before it does." Frank said think there are not enough votes in the House to gut the deduction. He also said that the deduction would play a role in the new Housing Policy that is being crafted in Washington. As mentioned in previous alerts, Fannie Mae and Freddie Mac are undergoing transition (NPR ARTICLE) and may even be eliminated. Other forms of housing finance assistance are being contemplated as all agree the old ways of propping up the housing market are broken. Congressman Frank added, "If I were starting a new country, I would not have it. I do not think it is ideal tax policy," Frank said. "Given the extent to which people's legitimate, vested interest include that, trying to abolish it now, even if we were in a wonderful economy would be unfair. Houses are still a large part of the wealth for many people. I think it's important for people to know that that's staying around and we can build on that." "The Sacred Cow" Part of the reason the deduction is called "sacred" is that its longevity is partly owed to the powerful housing lobby in Washington and the states. The leader of the pack is the National Association of Realtors, claiming that the housing market is too fragile now to alter the landscape and that home values would drop by about 15 % of the deduction were eliminated. Click and learn some more on how the deduction impacts all homeowners even if you do not deduct mortgage interest. We will keep you up to speed on this ever-changing situation