The popular mortgage interest deduction could be in the crosshairs again as Republicans seek to overhaul the tax code.
GOP lawmakers and President Donald Trump have made overhauling the tax code a top priority. However, they need to find about a trillion dollars in order to finance the tax cuts they’re proposing, according to an Associated Press report. One of the ways Republicans are considering finding the cash it by eliminating the mortgage interest deduction.
About 20% of taxpayers – around 30 million people – regularly deduct mortgage interest from their income taxes, the AP reported. The most recent IRS figures found that nearly 44 million people claimed the deduction for state and local taxes in 2014 – especially in states like New York and California, where both taxes and the cost of living are high.
The mortgage interest deduction is expensive for the government – it costs about $700 billion over the course of a decade, according to the AP.
But the deduction is wildly popular with homeowners – and real estate and mortgage industry groups insist that it encourages homeownership.
Indeed, industry groups have bristled every time the deduction seemed headed for the chopping block. Last month, when it was suggested that the cap on the deduction – currently set at interest on up to $1 million – be lowered, professional associations lost no time condemning the proposal.
“Limiting the mortgage interest deduction amounts to a de facto tax increase on current or future homeowners,” National Association of Realtors President William Brown said last month. “We would have strong objections over any effort to further cap or limit the deductibility of mortgage interest.”