Tax deduction for mortgage interest could be on the chopping block

It's been around since 1913, but its time may be up. Such a change would generate billions of dollars in federal revenue that could be used to cut the deficit while inflicting little pain on most middle-class homeowners.

By Don Lee,
Los Angeles Times
December 20, 2010

Reporting from Washington

Fifteen years ago, Carol Nietmann and her husband bought a spacious house in Maryland near Chesapeake Bay. And thanks to the time-honored tax deduction for mortgage interest, she said, their new place was a little bigger and a little nicer than they would otherwise have thought they could afford.

Much the same has been true for millions of Americans up and down the income scale. Perhaps the most sacred of all the sacred cows in the tax code, the home mortgage deduction has long been seen as crucial to a major element of the American dream — owning your own home.

It has also been a boon to home builders, construction workers, the financial services industry and local governments that benefited from fatter real estate tax revenue.

But nearly a century after coming into existence, the mortgage deduction may face a day of reckoning. Although out of the spotlight while the lame-duck Congress thrashes to an end, the mortgage deduction issue is likely to resurface next year when the new Congress — including a lot more deficit-hawk Republicans — takes over.

(More here.)