The home mortgage interest deduction allows homeowners to reduce their taxable income by the amount of the interest paid on their mortgages. The deduction is intended to encourage home ownership, which proponents say remains central to "the American dream." Since its inception in 1913, the mortgage interest deduction has been credited with paving the way for middle-class home ownership and has become a cornerstone of the housing market.
Seventy-three percent of voters-both owners and renters-believe the federal government should provide tax incentives to support home ownership, according to a poll conducted on behalf of the National Association of Home Builders (NAHB). The poll, conducted in early May 2011, shows that support for the mortgage interest deduction is strong across party affiliations. Seventy-seven percent of voters oppose proposals to eliminate the mortgage interest deduction, and 63 percent oppose reducing the deduction. The New York Times conducted a similar poll with CBS News, which found that more than 90 percent of Americans support the mortgage interest deduction.
The Budget Control Act, which President Obama signed into law on August 2, 2011, increased the debt ceiling by $2.1 trillion and cut $2.117 trillion in spending over the next 10 years. While the agreement did not deal with tax reform, it established a 12-member Joint Select Committee on Deficit Reduction that is tasked with reducing the deficit by an additional $1.2 trillion. The recommendations, which may include a combination of tax and entitlement reform, must be submitted to Congress by November 23, 2011. The mortgage interest deduction may be in play over the next six months as those negotiations progress.
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