The National Housing Trust Fund Campaign continues to build support for NLIHC’s proposal to modify the mortgage interest deduction and use the savings from reform to fund the National Housing Trust Fund. As of Friday, October 19, 45 national organizations and 307 state and local organizations have endorsed the proposal. For many organizations, taking a position on tax policy is new and endorsing the proposal required approval by their board of directors.  Many other organizations have consideration of the proposal on upcoming agendas. NLIHC is happy to assist any organizations with their presentations.

The mortgage interest tax deduction is a part of the tax code that allows some homeowners to deduct a portion of the interest they pay on their mortgage from their taxable income. Under current law, homeowners who itemize on their tax returns can deduct the interest paid on mortgages on first and second homes up to a total of $1 million, and the interest on up to an additional $100,000 in home equity loans. NLIHC proposes to modify the current mortgage interest tax break by reducing the size of a mortgage eligible for a tax break to $500,000, and by converting the deduction to a non-refundable tax credit.

Depending on the percentage of the tax credit, this proposal to modify the mortgage interest deduction into a tax credit will save the federal government between $20 billion and $40 billion a year while making this tax benefit more available to the middle and lower income families who need it. Homeowners would receive a non-refundable tax credit for interest on mortgages up to $500,000. Interest on second homes and home equity loans would be eligible for credit under the $500,000 cap.

These changes would mean that all homeowners with mortgages would get a tax break, not just those who have enough income to file itemized tax returns. With a 20% tax credit, the number of homeowners with mortgages who would get a tax break would increase from 43 million to 60 million, with 92% of the increase being households with incomes less than $100,000 a year. It would also provide over $20 billion a year in savings that can be used to build and rehabilitate affordable rental housing by capitalizing the National Housing Trust Fund.

To learn more about the proposal, view a list of organizational endorsers and use a calculator to determine how the proposal would affect your tax bill, visit www.housingtaxreform.org.

For a Frequently Asked Questions (FAQ) document that goes into detail on the mortgage interest deduction and NLIHC’s proposal, as well as the results of public opinion research on mortgage interest tax reform and other resources, click here.

Click here to sign on to endorse the proposal.