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Proposed Mortgage Interest Deduction
The federal budget proposes to reduce the value of itemized deductions for wealthier households to 28 percent for married couples with incomes over $250,000 and individuals with income over $200,000. Currently, depending on the tax bracket these households are in, the value of their deductions could be as high as 33 or 35 percent.
For Bergen County New Jersey this would affect many home owners where many home values and, income levels fall within the proposed criteria. Towns such as Alpine, Tenafly , Demarest , Englewood Cliffs and others will especially feel the impact of such legislation if passed.
As part of its fiscal year 2011 & 2012 budgets, the Administration has proposed limiting the value of the mortgage interest deduction (MID) for upper income taxpayers by, in effect, converting the deduction to a 28% tax credit for those individuals who are currently in the 33% or 35% tax brackets. Individuals with incomes below $250,000 would generally not be directly affected by this proposal.
In December 2010, the President’s Commission on Fiscal Responsibility and Reform (the Deficit Commission) released a host of deficit reduction proposals. Those recommendations included (1) repeal the MID in favor of lower tax rates, (2) reduce the $1 million cap to $500,000, (3) eliminate the deduction for second homes and (4) convert the deduction to a 12% tax credit.
The proposal has never won significant favor with either party to be considered and the National Association of Realtors (NAR) is firmly objecting to it on the grounds that “The mortgage interest deduction is vital to the stability of the American housing market and economy,” according to NAR President Moe Veissi. Read more on the National Association Realtors site