Tuesday, April 2, 2013

Mortgage Interest Tax Deduction New Proposal

Mortgage Interest Tax Deduction New Proposal

Mortgage Interest Tax DeductionThe bill would allow more homeowners to claim a mortgage-interest deduction on their federal income taxes.

U.S. Rep. Keith Ellison has a game-changing tax fix that he think most Americans would happily get behind.

Ellison, the Democrat who represents Minnesota's 5th Congressional District, just proposed a bill that would revise the federal tax code, radically changing the way America's mortgage-interest deduction works.

Where you fall on the income scale will likely determine how you feel about Ellison's idea as proposed in The Common Sense Housing Investment Act.

Mortgage Interest Deduction Math

Right now, anyone with a home mortgage can write off the interest they pay on their federal income taxes. The calculation is simple: The amount you paid in interest for that year is subtracted from your income.

This is a big deal for many taxpayers. One estimate from The Wall Street Journal puts total federal tax savings at $100 billion a year. It's also a big deal to real estate agents and banks, as the tax write-off can be a major selling point for homes and home loans.

But to utilize the mortgage-interest deduction, you have to itemize your taxes, which not everyone can do. Enter Rep. Ellison and his Common Sense Housing Investment Act. His bill would open the mortgage-interest deduction to more taxpayers by changing how they claim it. Rather than taking whatever they paid in interest off their income, now homeowners would claim a standard 15 percent tax credit.

Under the Common Sense Housing Investment Act, the number of Americans able to claim the mortgage-interest deduction would jump from the current 43 million to 60 million.

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Perhaps the most interesting trick here is that the bill would allow more homeowners to claim a mortgage-interest deduction on their federal income taxes, but also allow more total tax revenue to be raised.

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