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Trump official floats cap on tax deduction


A popular tax break for homeowners —  the mortgage interest deduction — could be on the chopping block.

Treasury Secretary-designate Steven Mnuchin told CNBC this week that the administration favors capping the deduction.

Mortgagetax

“We’ll cap mortgage interest, but we will allow some deductability,” Mnuchin said in response a question, while denying claims that President-elect Donald Trump’s ambitious plans to overhaul the tax code would slash taxes for the wealthy.

“Any reductions we have in upper income taxes will be offset by less deductions, so that there will be no absolute tax cut for the upper class,” Mnuchin said. “There will be a big tax cut for the middle class, but any tax cuts we have for the upper class will be offset by less deductions.”

Trump’s original tax plan called for a cap on tax deductions, but would have left the mortgage interest deduction untouched. Mnuchin didn’t specify the limit.

The deduction on mortgage interest is already capped at $1 million in debt used to buy, build or improve a home, and at $100,000 for home equity debt. According to a December 2015 analysis by the Tax Policy Center, the mortgage interest deduction primarily benefits wealthier Americans. Few people with incomes below $50,000 even claim the benefit because they don’t itemize their deductions.

The Tax Policy Center estimated that the average tax benefit for a homeowner claiming the benefit would $2,056 in 2016. People earning less than $50,000 will receive a tax benefit of  $528, while those earning more than $1 million would claim an average of $8,835, according to the Tax Policy Center’s analysis.

The break is held dear by the U.S. housing and mortgage lobby, and Trump administration could run into significant opposition against limiting the subsidy.  

“We would strongly oppose any attempt to limit or eliminate the mortgage interest deduction,” William Brown, president of the National Association of Realtors, told CNBC. “Realtors know that the MID is an important benefit not just for the millions of current homeowners who depend on it, but also for renters looking to make the transition into homeownership.” 


 

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