Tax Deduction For Mortgage Interest In Jeopardy

As politicians in Washington look for ways to cut the federal deficit, a likely target is the deduction for mortgage interest.

But what will the withdrawal of such a subsidy do to the already weak housing market?

Expect to find out in the next three months about the mortgage interest deduction. I’m betting that it will be gone in the next few years.

There are all sorts of options short of completely eliminating the mortgage interest deduction.

How much does this deduction cost the federal government in revenues? About $100 billion a year. How much would it cut home prices if it were taken away? Up to 15%.

It’s like college. There are so many loans available for college and so much financial aid. What do all these subsidies do? They drive up the price of college. Anything you subsidize, you get more of.

So what if home prices drop 15%? There will be winners and losers from that and they will balance each other out.

The Los Angeles Times reports:

The National Assn. of Realtors sent an urgent alert to its 1.1 million members asking them to directly “engage their members of Congress on the importance of preserving real estate tax provisions” during the coming several weeks. Officials acknowledge that the super-committee’s structure — with its guaranteed punishments for failure aimed squarely at Republicans (military spending) and Democrats (social programs) — makes it more difficult than usual to influence the final outcome.

After decades of being considered politically sacrosanct, why are homeowner mortgage write-offs suddenly on the chopping block? No. 1 is sheer size. The congressional Joint Committee on Taxation estimates that the home mortgage interest deduction will cost the federal government $100 billion during fiscal 2011 and $107.3 billion in fiscal 2012. Between 2008 and 2012, the cumulative write-offs for mortgage interest are projected to total just under half a trillion dollars.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (, he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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