Panel Unveils Proposal Suggesting Limits on Mortgage Tax Deductions

In early November, co-chairs of the ""National Commission on Fiscal Responsibility and Reform"":http://www.fiscalcommission.gov/ released a draft of a proposal that suggested significantly reducing mortgage interest tax deductions.

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The final proposal was released Wednesday amid much controversy.

The details of the draft have been circulating for weeks, and while the proposal has received some support, there has been much opposition to such drastic measures in such uncertain and unstable times for the housing market.

The proposal suggests limiting the mortgage interest tax deduction to principal residences only, and eliminating the deductions for mortgages exceeding $500,000.

Currently the tax deduction is capped at $1 million dollars and includes second residences.

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After the proposal's release, Ron Phipps, president of the ""National Association of Realtors"":http://www.realtor.org/ (NAR) issued a statement expressing extreme reservations regarding the suggested limitations.

""The tax deductibility of interest paid on mortgages is a powerful incentive for home ownership and has been one of the simplest provisions in the federal tax code for more than 80 years,"" Phipps said.

""NAR firmly believes that the mortgage interest deduction is vital to the stability of the American housing market and economy,"" he continued.

The full commission is scheduled to vote on the proposal on Friday, and the proposal must receive 14 of 18 votes in order to make it to Congress. 12 of the 18 members of the commission are members of Congress.

Bob Jones, chairman of the ""National Association of Home Builders"":http://www.nahb.org/default.aspx (NAHB) issued a statement in response to the unveiling of the plan.

""While we commend the hard work of the President's deficit commission to improve the nation's fiscal situation, this is simply the wrong approach to the problem. It would put a huge tax increase on millions of middle-class home owners by eliminating or devaluing the mortgage interest deduction,"" said Jones.

The commission says if passed the proposal will cut the deficit by $4 trillion by 2020.

Jones says if passed the consequences of the proposal would be ""devastating for housing and the economy.""