The possibility of eliminating the mortgage interest deduction on primary residences continues to draw interest in the nation’s capital. While most housing analysts believe the chances this will happen are remote, consumers have been interested in knowing the most popular alternative to the present plan.
Under present law, homeowners with a mortgage may deduct the amount of interest paid on a first or second home (interest allocable to up to $1 million in mortgage debt) plus interest paid on up to $100,000 of home equity loan debt. The proposed new plan offers a 12 percent mortgage interest tax credit.
With the help of the National Association of Home Builders, let’s look at the basics. The amount of the home mortgage interest deduction is added to other permitted itemized deductions, such as expenses for real estate taxes, charitable contributions, and state and local income/sales taxes.