Representative Keith Ellison (D-MN) introduced the “Tax Benefit for Homeownership Clarification Act” (H.R. 6492) on December 8 to clarify the amount of mortgage interest a person can deduct from their taxes.
Under the U.S. tax code, taxpayers can deduct the interest paid on up to $1 million of a mortgage ($500,000 if married but filing separately). Until recently, the Internal Revenue Service (IRS) has applied this dollar limit on a per-residence basis. Unmarried co-owners of property were limited to the same cap on the mortgage interest deduction (MID) as married taxpayers filing jointly.
A recent Ninth Circuit court case, however, overturned the IRS’s interpretation of the tax code. According to the court, unmarried taxpayers who buy a home together are now able to deduct up to $2 million in mortgage interest, twice the amount that a married couple would be allowed to deduct.
H.R. 6492 would fix this unequal treatment by reducing the amount of mortgage against which the MID can be claimed by separate filers gradually over time until the separate limit is $500,000, half of the joint $1 million limit. The bill also clarifies that couples filing jointly, married or unmarried, can deduct mortgage interest on only up to $1 million of a mortgage.
The MID is the largest federal housing subsidy in the U.S. The MID is projected to cost more than $68 billion in FY17, nearly double the $38 billion requested by the Administration for the HUD budget for discretionary programs in FY17. A disproportionate share of the MID’s benefit goes to wealthy homeowners: The top 18% of taxpayers who claimed the MID (those with incomes of $200,000 or more) receive 42% of the total benefit.
Learn more about the bill at: http://bit.ly/2giMV11