With the fiscal cliff drawing ever closer and lawmakers still at loggerheads when it comes to determining what federal programs or tax breaks might get the axe as they try to balance the budget, one particularly big concern looms larger than others.
But now, the debate over what to cut and what to leave untouched has become so heated that a tax provision that allows consumers to write off the interest they paid on their mortgage over the course of the year might end up on the bargaining table, according to a report from the New York Times. While it was always very likely that many deductions would be eliminated through the negotiation process, many experts believed this one, which can save millions of consumers hundreds or even thousands of dollars each per year on their tax bills, would be off-limits.
One potential hurdle to the elimination of the tax break, apart from the fact that so many lawmakers consider it vital, is that the real estate industry, which wields considerable lobbying power, is vehemently opposed to such a move, the report said. Many within that industry, however, are waiting a little longer to see how negotiations play out before they wade into the fray.
“Until Congress introduces specific legislation, there’s nothing to say about any proposed changes to the mortgage interest deduction,” Gary Thomas, president of the National Association of Realtors, told the newspaper via email. “However, it has always been the NAR’s position that the mortgage interest deduction is vital to the stability of the American housing market and economy, and we will remain vigilant in opposing any future plan that modifies or excludes the deductibility of mortgage interest.”
Interestingly, there has been some talk from both sides of the political aisle in recent months about the possibility of capping the mortgage interest deduction, including from both President Barack Obama and his former Republican opponent Mitt Romney, the report said. However, experts say that such a move likely wouldn’t have much of an impact on the federal deficit, given the relatively small number of those in the upper class who would be affected by such a move.
Consumers may want to keep a close eye on fiscal cliff negotiations in the coming weeks so that they know exactly what tax breaks are being cut, and how those eliminations might affect their filing status at the end of the year.
Image: ralphunden, via Flickr