Honey I Shrunk The Mortgage Interest Deduction Plan 1

Honey,​ I​ Shrunk the​ Mortgage Interest Deduction – Plan 1
The political landscape this year has been nothing but ugly .​
It promises to​ come to​ full boil with the​ proposed tax reform eliminating or​ reducing the​ mortgage interest deduction .​
Tax Reform or​ Raising Taxes
There is​ an​ old saying about the​ two political parties .​
Democrats raise taxes while Republicans reform taxes .​
In both instances,​ we end up paying more money .​
In a​ very brave move,​ a​ bipartisan committee is​ recommending tax reform that goes after the​ beloved mortgage interest deduction .​
The committee looking into tax reform was given a​ directive by President Bush to​ simplify a​ tax code that is​ universally agreed to​ be a​ disaster area .​
You may not realize it,​ but two additional sections are added to​ code every day on​ average .​
One of​ the​ particular problems is​ the​ Alternative Minimum Tax,​ which was originally designed to​ keep super wealthy people from avoiding taxes .​
Because it​ was written poorly,​ the​ AMT now affects a​ large percentage of​ people .​
The problem,​ however,​ is​ how do you​ get a​ make up for a​ tax that produces millions of​ dollars in​ revenue for the​ government?
The committee’s answer is​ to​ go after the​ mortgage interest deduction .​
The committee has offered two plans and we’ll look at​ the​ first one here .​
In the​ first plan,​ the​ mortgage interest deduction would be reduced to​ a​ figure related to​ the​ loan amount the​ FHA will back .​
The FHA was set up to​ help low income individuals get homes,​ which means the​ effective cap on​ the​ deduction would be very low .​
In San Diego,​ the​ average single-family home costs in​ excess of​ $600,​00 .​
The FHA cap for the​ city is​ around $315,​000,​ which means homeowners would lose approximately half of​ their deduction .​
In expensive real estate areas,​ this will mean many people will lose the​ ability to​ make their mortgage payments,​ which means defaults .​
With borrower defaults will come the​ end of​ the​ housing market boom .​
The loss of​ equity will,​ of​ course,​ cause many people to​ go upside down on​ their loan,​ which will be another disaster .​
If Congress pursues a​ cap on​ the​ mortgage interest deduction,​ chaos will reign .​
It is​ hard to​ imagine this option being adopted by the​ politicians.

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