By Kevin Chiu
Bet you didn’t realize that the mortgage tax deduction is in real jeopardy as a result of Congress pushing through their last minute agreement on the budget? It’s been a quiet little secret in Washington, D.C. real estate circles because elected officials have taken so much heat on the subject.
Some think it won’t happen. Others are sure homeowners are about to lose their biggest tax deduction.
Thanks to Congress’ new debt ceiling plan and the creation of a 12-member “Super” committee made up of six Republicans and six Democrats the next 100 days could lead to the end of the tax deduction that more Americans take advantage of than any other, according to the IRS.
The legislation signed by President Barack Obama sets up a two-step process to increase the debt ceiling and make spending cuts of $917-billion. The measure also created the Joint Select Committee on Deficit Reduction (6 from each party) to work out the differences to slash another $1.5-trillion from the federal deficit. The committee is required to vote on a plan by Nov. 23 rd.
But here’s the catch. If committee members can’t agree on a plan or the Senate or House vote it down automatic spending cuts go into effect on Defense Department and domestic programs. Those programs could include the mortgage tax deduction, which would equate to a tax increase for more than 40-million Americans.
Think Congress has taken heat so far with the mess in Washington? They haven’t seen anything yet if that happens. Here’s the best part. Approving the final package of deficit cuts only takes a straight “up or down vote.” That’s right a simple majority will pass the new cuts.
The compromise could involve new revenues and would take just one member from either party to cross party lines. Lobbyists from the National Association of Realtors, new home builder associations, the Mortgage Bankers Association and all sorts of other banking groups are gearing up for the fight.
NAR sent an urgent alert to its 1.1 million members asking them to “engage their members of Congress on the importance of preserving real estate tax provisions.” That’s Realtor-ease for “contact your Congressman!”
The mortgage tax deduction has been considered sacrosanct for decades, but in these trying and troubled political and economic times it might be open game hunting on the deduction. The outcome is hard to judge, which is why the special interests have poured millions of dollars into the effort and rallied around members of Congress.
Congress Joint Committee on Taxation estimates the home mortgage interest deduction write-off cost the federal government $100 billion in 2011 and will be a higher $107.3 billion the following year. Over a five year period that equals a half a trillion dollars. Any wonder why it’s a political hot potato?