Will there be big changes in US mortgage loan interest tax deductions?

Are big changes in store for US taxpayers?

Unlikely, since this proposal by the Obama administration will be opposed by just about every person who has ever voted, every bank employee, and every person who has ever invested in the US stock or bond markets.

Points for gumption on the part of the government, though.

According to Banker & Tradesman, the Obama administration is proposing tightening the US tax regulations that allow wealthy Americans to take deductions on interest paid on their mortgage loans (as well as for charitable donations).

Currently, individuals with incomes above $200,000 and families with incomes above $250,000 can lower their taxes by an amount equal to as much as 39.6 percent of their itemized deductions. The Obama administration wants to lower the cap to 28 percent — the level in place at the end of the Reagan administration.

Because families in lower tax brackets don’t benefit as much from itemized deductions, the system in place now provides a disproportionate benefit to the wealthy, the administration said in its proposed budget.

The Obama administration proposed this, last year, but it went nowhere. Response has been fast and furious to the new proposal, with the Mortgage Bankers Association seeing it as causing a meltdown of the US housing market (again).

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