Congress, Idaho and the Mortgage Interest Deduction

Since yesterday was tax filing day, I thought it a good time to discuss the current attack on the Mortgage Interest Deduction (MID) going on in Congress. As most home owners realize that by itemizing on your taxes and deducting mortgage interest paid, you can usually save some money on income tax.

For example, a family who bought a home last year with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file this year.

A recent survey, American Attitudes About Homeownership, revealed that 74 percent of home owners and 62 percent of renters thought it was “extremely” or “very” important that the MID remain in place.

In Congress, some lawmakers like to call the mortgage interest deduction (MID) a tax break for higher-income households but the vast majority of households that take the deduction are middle-income families, earning either less than $100,000 a year or between $100,000 and $200,000 a year (the typical cut-off point between wealthy and non-wealthy households).

Younger households are also among the biggest beneficiaries, because such a small part of their monthly payment goes to principle. Other big users are larger households—those that need bigger houses to accommodate everyone in their family.

Luckily not all congressmen are on board: "The mortgage interest deduction is helping to keep Americans in their homes at a time when many of them are struggling financially, so it would be foolhardy to tamper with the popular tax benefit now," Rep. Ruben Hinojosa (D-Texas) said at a forum in Washington Sunday.

"If the deduction is eliminated or changed, blame will be placed at the feet of those lawmakers who supported such a “misguided” policy by voters," said Hinojosa, a senior member of the House Financial Services Committee and one of the original sponsors of a House resolution

The resolution was introduced in early January and has just under 40 cosponsors, “and I expect many more to sign on” after lawmakers return next week from a recess, Hinojosa said.

“I cannot support a change to MID to a tax credit, for first or second homes, at this time,” Hinojosa said. “I don’t want to test the waters with Americans already nervous about the economy. Home owners expect to use MID, and buyers expect to receive it.”

If this is something you care about you may want to keep an eye on it and contact our senators and representatives.