Congress has been struggling for some time to trim the federal budget deficit. There is some speculation that Congress might consider eliminating the taxpayer mortgage interest deduction. It was released that this would save the government an estimated $134 billion. The current tax code allows homeowners to deduct up to $1 million of mortgage interest paid and up to $100,000 in home equity debt. However, a deciding factor for Congress might be the fact that only 23 percent of taxpayers used the tax break in 2010. This is due to the fact that the taxpayer’s deductions – mortgage interest, charitable giving and other expenses – must be worth more than the standard deduction. The deduction is mostly used in areas where housing costs are high.
If Congress pushes to eliminate the tax break, it will be a controversial decision. Although many taxpayers do not use the mortgage tax break, it is wildly popular. Recently, a Los Angeles Times columnist was criticized by angry readers after discrediting the tax break in an article. Nevertheless, the budget deficit is substantial enough that Congress is still discussing the elimination of it. More recent evidence shows that the estimated $134 billion that would supposedly be saved by eliminating the tax break is incorrect. The Joint Committee on Taxation released a revised version that indicates only $69.7 billion would be saved. Many analysts believe that rather than eliminating the break altogether, Congress might look to making “trims” to it instead.
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