How to Refocus US Mortgage Interest Relief

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By Robert Pozen

Published: February 21 2011 16:27 | Last updated: February 21 2011 16:27

The mortgage interest deduction is a huge budget item "“ almost $100bn per year in federal taxes forgone "“ with a weak link to its stated goal of promoting home ownership. In its most recent budget, the Obama administration proposed to eliminate the MID for all taxpayers with annual incomes of $250,000 and higher. But this proposal was rejected by Congress when the House was controlled by Democrats.

A more realistic approach would be for Congress to adopt the three-point plan for MID in the deficit commission's report: no interest deductions for mortgages on second homes and home equity loans, together with lower size limits on home mortgages eligible for the MID.

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