Most of us love tax breaks. But some tax breaks are more controversial than others. Here at Movoto, we’re referring to the mortgage interest deduction (MID), which has seen its fair share of talk in the past several years, and is working its way back into political conversations.
The tax deduction, which encourages homeownership, seems to be perpetually on the cutting block–and it doesn’t matter if the person holding the ax is a republican or democrat. Homeowners, and future homeowners, should pay attention to the discussion. Elimination of the MID will take money from their pockets.
What exactly is the MID? The MID, introduced with income taxes in 1913, allows borrowers to reduce their taxable income by the amount of interest paid on a loan, up to $1.1 million. It doesn’t matter if this is your first or second home.
And how popular is it? According to polling data released by the National Association of Home Builders (NAHB) earlier this year, three out of four voters believe it’s reasonable for the federal government to provide tax incentives to encourage homeownership.
“This sentiment cuts across regional and party lines, with 84 percent of Democrats, 71 percent of Republicans and 71 percent of Independents agreeing with this statement,” the NAHB wrote in a statement.
So Popular the President Uses It
In fact, it’s so popular that President Barack Obama, whose administration recommended limiting the tax break, used it when filing his 2011 taxes. Earlier this month, Obama and the first lady re-released their tax information in what political commentators are calling an attack on Romney’s image as a wealthy businessman who’s out of touch with Main Street.
Among the details gleaned from the tax information is the Obamas claimed a $47,564 home mortgage interest deduction on their $1.65 million Chicago house. This equates to a $13,318 savings on their tax bill, according to an analysis by the Huffington Post. For perspective, the Census Bureau reported in 2010 the median American household earned $49,445
So, what’s in the MID’s future? The short answer is, no one is certain, but the National Association of Realtors plans to hold a rally next month that the advocacy group has dubbed the Rally to Protect the American Dream. It takes place May 17 in Washington, D.C.
“NAR firmly believes that the mortgage interest deduction is vital to the stability of the American housing market and economy,” Stephanie Singer, a spokeswoman for the association wrote in an email to Movoto. “NAR is actively engaged to ensure that the nation’s 75 million homeowners will continue to receive this important benefit, and we will remain vigilant in opposing any plan that modifies or excludes the deductibility of mortgage interest.”
Editors’ Note: This is the first part of a two-part series discussing the mortgage interest deduction. Later this week, Movoto will highlight the pros and cons of the tax break.