Mortgage Deductions

[Irvinecommuter]

I am sure most of you have heard about the movement to eliminate or reduce the mortgage deduction.  I do not think it will happen any time soon but I can see it happening in the next 5 years especially when the economy recovers. 

Do you think that the mortgage deduction will eventually get reduced and maybe even eliminated?

What if any impact do you think that will have on the future of the housing market in Orange County (or other high value areas)?    Certainly, the mortgage deduction plays a material role in my decision on whether I can afford to buy a home in OC. 

 

[qwerty]

obama would like to cap it the deduction at the 28%, so for someone in the 33% federal tax bracket, it would cost them 5%- assuming the entire deduction was in the 33% bracket to begin with. so if someone was deducting 25,000 a year in interest at 33%, the tax benefit was 8,250, now at 28% the tax benefit would be 7,000, so it would cost someone 1,250 or about 100/month. not a big deal if they cap the deduction at 28%. now if they got rid of it entirely that would have a major impact on housing prices. 

 

[sgip]

There's been so much talk that the adage "where there's smoke, there's fire" is likely the case. Like any change in Government policy, I'd expect incremental change, the boiled frog approach, rather than any radical efforts to close out the MID. There's too many lobby groups that will fight this, but in the end it's likely to take place given what we're hearing.

My guess is that if the Government doesn't renew the Mortgage Debt Relief Act of 2007 - the one that allows short sellers to be shielded against a tax hit on forgiven principal - then the MID is also on it's way out.

 

[usctrojancpa]

There's been so much talk that the adage "where there's smoke, there's fire" is likely the case. Like any change in Government policy, I'd expect incremental change, the boiled frog approach, rather than any radical efforts to close out the MID. There's too many lobby groups that will fight this, but in the end it's likely to take place given what we're hearing.

My guess is that if the Government doesn't renew the Mortgage Debt Relief Act of 2007 - the one that allows short sellers to be shielded against a tax hit on forgiven principal - then the MID is also on it's way out.

I think they'll either cute the MID from loans up to $1m to loans up to $500k or have the MID phase out based upon your AGI.