Say goodbye to the mortgage interest deduction?

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Like death and taxes, there is one other certainty that home owners have expected to receive for years and years to come – the home mortgage interest deduction. As we’ve also come to expect every time the economy struggles, rumors about the demise of the home mortgage interest deduction will creep back into the news.

Does this mean we should be worried about losing the home mortgage interest deduction on tax returns?

No, I do not believe losing the deduction is something worth worrying about. Why?

Well, it has nothing to do with the government’s interest in the topic. The government would love having the home mortgage interest deduction repealed because millions of tax dollars would be available to use in the federal budget. However, doing that would anger pretty much everyone in the U.S.

And that is why I feel, after much discussion and politicking, the home mortgage interest deduction will not be going away.

Imagine you are running for President, Senate or Congress in 2012 (right around the corner from now). Do you really want to campaign for election knowing you voted to repeal the home mortgage interest deduction (negatively impacting millions of the voting public) versus someone who didn’t vote against the deduction (your opponent)?

If a candidate’s Congressional/Senate seat is in jeopardy, voting to eliminate the home mortgage interest deduction is the exact opposite of a savvy political move.

If anything changes with the home mortgage interest deduction, it would probably involve something like the following scenarios:

  • allowed only up to $500,000 financed. Any interest accumulated over a financed amount of $500,000 would not be a tax deduction.
  • allowed only on one’s primary residence. Would not be allowed on second homes or investment properties.

Those two scenarios have one thing in common. They don’t overwhelming impact the voting middle class. If anything changes (and that is a big IF), it would look something along the lines of the examples listed above instead of out right removing the home mortgage interest deduction for all home owners.

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