The debt compromise that cleared Congress today and is headed to the President for his signature before the midnight deadline does not change the mortgage interest deduction, which allows homeowners to deduct the interest on mortgages they pay if they itemize.
Earlier versions of compromise legislation, especially one put forward by six members of the House and Senate known as the Gang of Six, included language suggesting additional revenues could be raised by lowering the income level of homeowners who would be eligible for the MID to $200,000 for single taxpayers and $250,000 for couples filing jointly.
However, the mortgage interest deduction may not yet be out of the woods. The compromise passed by Congress sets up a super committee of 12 lawmakers that will look for a way to cut another $1.5 trillion from the deficit over the next decade. The super committee will have to make its recommendations before Thanksgiving. Once it does, the other members of Congress won’t be able to make modifications; they will only be able to vote the cuts up or down.
This scenario diminishes the influence of homeowners and real estate industry groups should the super committee decide to trim or abolish the mortgage interest deduction to help raise revenues. The Treasury Department estimates the mortgage interest deduction will cost around $100 billion in the 2012 fiscal year, which begins at the end of next month.
The compromise that cleared the Senate easily today will allow an initial increase to the debt limit by $400 billion and provide two more steps needed for raising the ceiling by between $2.1 trillion and $2.4 trillion, according to the Congressional Budget Office. The bill would cut an initial $917 billion in government spending between 2012 and 2021 and establishes a special committee to seek at least $1.5 trillion in additional savings over the next 10 years