President Bush’s tax reform commission tentatively agreed Tuesday to recommend a substantial reduction in the limit on mortgage interest that homeowners can deduct from their taxes. If a uniform nationwide cap was chosen to replace the current $1-million limit on mortgage debt eligible for deduction, it could be widely felt in California, which has some of the nation’s highest home prices. But to account for the wide disparity in home values nationally, the panel considered recommending a ceiling based on local housing prices but left the issue open, to be decided later. Some panel members suggested basing the limit on the Federal Housing Administration’s maximum on mortgages it will insure — currently $312,895 in Southern California.
I’m not quite understanding this. Is this the amount of interest you can deduct, or the house price (total mortgage). If the latter, that lower amount will really screw Southern California, where the median house price is near $600,000. Even a $1M limit (if it is the mortgage amount) could screw many homeowners in SoCal, for $1M houses are all too common out here, even in the plebian areas.
According to the New York Times article:
For mortgage loans up to $1 million, taxpayers can now deduct all the interest. One proposal discussed on Tuesday would cap the deduction at the maximum mortgage the Federal Housing Administration will insure.
That level changes each year and varies depending on housing costs in each county, with a maximum loan limit now of $312,895 in communities where housing is most expensive and a national average of $244,000, according to the housing administration.
If this is true, it would really screw Southern California.
The article continues:
The panel did not discuss Tuesday whether to recommend limiting the interest deduction on home equity loans or second homes, as had been previously suggested by some panel members. The issue still could be discussed later.
This latter issue was the concern of the Las Vegas article, where most homes are vacation or second homes. Of more interest to many folks reading this is the line “limiting the interest deduction on home equity loans”. This could affect many folks taking advantage of these.
Lastly, according to the New York Times article, they are exploring getting rid of the tax deductions for Health Insurance. Specifically, in the case of employer-paid health insurance, the main proposal the panel discussed would limit tax-free premium payments to the average cost of the premium the government pays for federal workers. That is now about $11,000 a year for family coverage. The proposal the panel discussed would allow taxpayers whose employers did not provide health insurance to deduct the amount of the premiums they paid for themselves.
I think it is time to write my congress critters to let them know that if this ever comes out, they shouldn’t support the notion. Unfortunately, I live in Democratic districts, so my congresscritters don’t have that much of a voice. Still, I think I’ll need to do this.