Federal Commission Recommends Changes to Mortgage Interest Deduction
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A commission appointed by President Obama to identify and propose spending cuts and tax changes to trim the federal deficit over the next decade has recommended significant changes to the current mortgage interest deduction (MID) as part of its final report issued on December 1. Specifically, the National Commission on Fiscal Responsibility and Reform has recommended converting the mortgage interest deduction into a tax credit, capping eligible mortgages at $500,000, and eliminating the MID for second homes and home equity loans.
The National Association of REALTORS® is firmly opposed to any modifications to the mortgage interest deduction, arguing that the MID is vital to the stability of the U.S. housing market and economy. A change to the mortgage interest deduction could bring down home prices at a time when the market is beginning to show signs of stability. According to NAR, home values could erode as much as 15 percent if the proposed changes to the MID outlined by the Commission are enacted into law.