by Zipporah Porton

One of the biggest incentives for homeownership right now is the subsequent tax deduction. However, a new reform might eliminate this opportunity.

The National Commission on Fiscal Responsibility and Reform, a bipartisan commission President Obama created in February to provide options on reworking the tax  system and fixing the national deficit, including a proposal to limit the mortgage interest rate deduction on taxes.

Needless to say, this is causing some strife in the real estate industry.

John Prior of Housing Wire posted in a recent story that according to a November report, one option excludes citizens from deducting interest payments on second residences, home equity loans or mortgages over $500,000.

Other options, according to Prior, would be to tax dividends and capital gains at the ordinary rates. The commission claims that its plan would reduce the deficit by nearly $4 trillion through 2020.

Michael Berman, chairman of the Mortgage Bankers Association, had this to say in a release about the proposed cuts. warned that now is not the time to be cutting back incentives:

“Given the fragile state of the nation’s housing market, now is not the time to be scaling back incentives for homeownership.  The mortgage interest deduction is one of the pillars of our national housing policy, and limiting its use will have negative repercussions for consumers and home values up and down the housing chain.

“We share the widespread concern over the growing national debt and want to help identify reasonable solutions, but we cannot support proposals that would chip away at the foundations of the real estate market.”

To view the commission’s entire proposal, click here.

Let us know how you feel about the prospect of limiting the mortgage interest rate deduction on taxes!

Zipporah Porton is the editor of Chicago Agent magazine. She can be reached at zipporah@chicago.staging312.com.