Some say that targeting mortgage interest tax breaks more towards middle class and lower income homeowners will provide a tax benefit where it is needed most and create revenue that can be used to help end homelessness.
I’m not sure how accurate that is, but it’s an interesting notion.
Mortgage interest tax deductions are a part of the tax code that allows some homeowners to deduct a portion of the interest they pay on their mortgage from their taxable income.
Under current law, homeowners who itemize on their tax returns can deduct the interest paid on mortgages on first and second homes up to a total of $1 million, and the interest on up to an additional $100,000 in home equity loans.
One group seeks to modify the current MID
The National Low Income Housing Coalition (NLIHC) and United for Homes campaign propose to modify the current mortgage interest tax break by reducing the size of a mortgage eligible for a tax break to $500,000, and to convert the deduction to a 15% non-refundable tax credit.
Accordingly, the revenue generated from these savings would be used to fund the National Housing Trust Fund. And as a result some 16 million more homeowners would get a tax break
The few versus the many
Think about it: Only 24 percent of all taxpayers claim the MID.
By converting the MID to a credit, all homeowners with mortgages would get a tax break, not just those who have enough income to file itemized tax returns.
Through their proposed housing tax reform, they say the number of homeowners with mortgages who would get a tax break would increase from 39 to 55 million.
According to a national poll conducted by Belden Russonello Strategists, “Some 60% of Americans favor the United for Homes housing tax reform proposal. Seventy-six percent of Americans favor building more affordable housing in their states to help end homelessness.”
This advocacy group presents one argument, while others argue that the MID should be removed altogether. The National Association of Realtors (NAR) has long linked the MID to homeownership, calling it “a remarkably effective tool that facilitates homeownership,” and they have fought endlessly to keep it alive. Nothing will happen in the near term, but we’ll continue to watch proposals regarding this tax deduction after the election year wraps up.