Proposed Elimination of Home Mortgage Interest Deduction

The President's Advisory Committee on Tax Reform has recently proposed eliminating the home mortgage interest deduction, along with deductions for property taxes and state and local income taxes, and replacing these deductions with tax credits.

An analysis of the proposed "simplification" of the tax code performed by the National Association of Home Builders (NAHB) suggests that the proposal to eliminate the popular home mortgage interest deduction would effectively result in tax hikes for many home owners.

In addition, several economists have theorized that elimination of the home mortgage interest deduction would result in the wholesale devaluation of homes as an asset class.

It sure doesn't seem like the proposal does much to simplify the tax code. Higher taxes don't sound too good either, nor does the prospect of my home being devalued. Political commentators have suggested that the Advisory Committee's recommendations are DOA, and have no chance of passage in Congress. For the sake of current and future homeowners, let's hope the pundits are right.

If we are really interested in simplifying the tax code, serious consideration should be given to the FairTax proposal. The FairTax is a non-partisan proposal (HR 25/S 1493) that abolishes all federal income taxes, including personal, estate, gift, capital gains, alternative minimum, corporate, Social Security, other payroll, and self-employment taxes, and replaces them all with one simple, visible, federal retail sales tax. Although I have not studied the FairTax proposal, the idea of not having to prepare and file an annual federal income tax return for myself and my two businesses sounds quite appealing. For more information check out Americans for Fair Taxation.