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Mortgage Interest Income Tax Deduction on the Chopping Block

Written by Gary North on November 27, 2012

The government is looking for ways to increase revenue, yet at the same time it is trying to find a way to make these tax changes acceptable to middle-class voters. One of the ways that this can be done, and in fact may be done, is to reduce the amount of money that someone can deduct from his income taxes based on mortgage interest rate payments.

At present, it is possible to deduct all interest rate payments that are part of the mortgage of the home you live in, or a second home that you own. This way, rich people get a major tax advantage. If the mortgage rate interest payment is removed as a deductible item, it will probably apply only to people who are perceived as rich.

I think it is unlikely that there would be a removal of this deduction for all homeowners. The reason for this is obvious: the housing market is just barely in the early phases of a recovery, and if existing housing owners lost their interest rate deduction, some of them, possibly millions of them, would be forced to sell. That would be unacceptable to people in the housing market. Realtors and their lobbying groups would put enormous pressure on Congress not to remove the interest rate deduction for middle-class homeowners.

I am going to make the assumption that Republicans in the House are willing to impose taxes by the back door. They will do this by removing tax deductions. The most obvious one that they could get away with politically is probably the interest rate payment on homes that are owned by people who are considered rich. The fight will be on defining which people are considered rich.

There may be some form of deduction. Maybe there will be a limit on how much money somebody can deduct. Maybe there will be a limit in terms of the percentage of the total payment that he can deduct.

The negotiations at this point are still a matter of theory. Even though the fiscal cliff presents itself on January 1, Congress is still in the back room stage of the negotiating process. It is all guesswork as to what, if anything, they are going to be able to come up with that Pres. Obama will sign. But my guess is that the mortgage interest deduction for people with gross incomes above $150,000 a year is probably on the chopping block.

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8 thoughts on “Mortgage Interest Income Tax Deduction on the Chopping Block

  1. And what will inevitably end up happening is that the middle class will lose. While I am way under any definition of rich, my income is too high to qualify for any of the assistance programs whether it is Pell grant for my children's college, the government program for lowering my mortgage payment, any assistance what so ever. If American's haven't figured out yet that when anyone in Washington is looking for money, any working group is not safe. Washington will find a way to take our money as they feel it is their right. As Reagan said, "The nine most terrifying words in the English language are, 'I'm from the government and I'm here to help."

  2. If you go see the movie 'Lincoln' you will get a small idea of teh trickery and backroom dealings that go on in congress. too bad Sandy didn't whack the whole sheebang and let us start over.

  3. There's probably not 1 in 10,000 who consider that when they sign a 1040, a W-9 or a W-4 they are confessing to being under the jurisdiction of the tax code. They are swearing under penalty of perjury that they are a "US Person", a "taxpayer" and that they are subject to the tax laws of the United States. They are in effect waiving all their rights and protections with the flourish of a pen.

    If a prosecutor were to hold up their signed paperwork when they're on the witness stand and say, "Is that your signature, Mr. Taxpayer??!!" and the witness were to answer, "I didn't realize I was admitting to being a 'taxpayer' [as defined by statute] and a 'US Person' [as defined by statute]", the prosecutor would shoot back: "Ignorance of the law is no excuse!"

    Know what you're signing and admitting to when you put your John Hancock on any government paperwork.

  4. Danno,
    Have you figured a way to secure a job, receive a check or otherwise get compensated for work done to legitimately "get around" this fact? If so, please enlighten us!

  5. With most US companies acting as unpaid tax collectors for Uncle Sam in violation of the 14th Amendment outlawing involuntary servitude, you can't. If you can work without a W4, then do. You used to could claim "Exempt" if you could certify to two conditions: 1) that you had no taxable income for the previous year and 2) you anticipate having no taxable income for the next year. If you know the statutory meanings of "taxable" and "income" you could swear to those two facts in good clear conscience. But the feds use threats of extortion and terror to get payroll departments to ignore your rights and withhold at the single rate with no deductions.

    Unfortunately, with government run amok and invading every facet of life where it doesn't belong, you are forced to enter into their jurisdiction and swear that you are a statutory taxpayer in order to put food on the table and a roof over your head. And thus the trap is shut.

  6. Public_Citizen says:

    When, and I say when not if, the home mortgage deduction becomes a negotiating chip it will go the same way as the Income Tax that was originally sold as a tax on the rich.
    Any attempt to tamper with the mortgage deduction for a principal residence will place the entire residential real estate industry in even more peril than it already faces.

  7. Rabelrouser says:

    Again, I repeat myself , if the American people only took the time to understand the Fraud of the Federal Reserve, and understand how the "taxing sysytem" is nothing more than an effort to control the average person through Non- Constitutional Statute Law ( Commercial Law) they would finally have the ammunition to fight back. And their choices for representatives would be wholly different.
    But, Alas, they ( American citizens) continue to refuse to become educated; and more so, continue to be enslaved by "laws" that are designed to make them viseral slaves economically. They are Co-Debtors with the Federal Government with equal responsibility for the debt incured by the Government. All "manipulated legally" but without the american citizens full knowledge. YOU ARE responsible for their borrowing!
    Complain all you want, but your words fall on deaf ears, because you dont know HOW to complain, or how to fight back.
    You have been defrauded, and Danno has made a small case of that fraud, but instead of being outraged at being defrauded, you remain victims by your fear; which is caused by your lack of knowledge.

  8. This is onoly a bvaby step is confiscating our hard earned money. Once they get their foot in the doorway comes the big push for the entire foot.
    IF this tactic had been used the day after Sept. 11th, 2001 we would not be at war any where on the planet. Just think if Sept. 12th, 2001 the United States sent missles to the country that was responsible for 9-11 with the message; you stepped on one of my toes. In return I will crush your entire foot. Yes the oil wells would have burned for about a month. However, chances are China would have to step back and say – well done. Further our gasoline would be at the cost at the pump perhaps 89Cents. That is where is was in 1998.
    Yes, it is something to think about. Instead, we are here in 2012 and facing a nightmare of incoming taxes.