Mortgage Interest Tax Deduction Survives Fiscal Cliff
The fiscal cliff has been avoided and a deal has been made. Some components of the deal related to the housing industry were extended for 2013 and will operate as they have prior to their expiration.
In addressing the survival of the mortgage insurance deduction for certain tax brackets, Isaac Boltansky, a Washington analyst with Compass Point Research & Trading, said “This is a meaningful win for the housing lobby generally and more specifically the mortgage insurance industry.”
Another component of the fiscal cliff deal is the mortgage interest tax deduction. In a previous Thought Leadership post, we detailed the debate for and against the deduction. In order to resolve the budget, the deduction was kept.
“While the mortgage interest deduction avoided a direct hit this time around, we doubt it will […] dodge Congressional scrutiny going forward,” Boltansky wrote.
Keith Gumbinger, vice president of HSH.com, weighed in on the decision. “Lawmakers will eventually have to touch the ‘third rail’ of mortgage-interest deductions because some view the benefits to be disproportionate,” he said.
According to Compass Point, the deduction will make buying more affordable as it is expected homeowners will save $100 billion this year from mortgage interest deductions.
“The industry’s ability to close on this priority demonstrates its clout on Capitol Hill, which will be needed in 2013,” Boltansky wrote about the extension of the tax deduction.
Other tax credits from the deal include an extension on the Mortgage Forgiveness Debt Relief Act of 2007 and the American Taxpayer Relief Act of 2012. Property tax deduction and tax credits for energy efficient improvements for existing homes also remain.
To read more about the deals made related to the housing industry, see this CNBC article or this article on the Mortgage Interest Tax Deduction. Additional information about other aspects of the fiscal cliff deal can be found in this article on National Journal.com.
– J.D. Crowe, Senior Vice President of Southeast Mortgage