What's one easy way to collect more taxes without raising them? End deductions, of course.
That logic makes the home mortgage interest deduction vulnerable, says Gibran Nicholas, chairman of the CMPS Institute, a firm in Ann Arbor, Mich., that trains mortgage bankers and brokers.
The policy lets homeowners deduct the interest they pay on a mortgage on their tax returns. For instance, if a homeowner is paying a $200,000 mortgage with a 4.5 percent interest rate, she's paying about $9,000 a year in interest. But if she deducts that interest, depending on her tax bracket, she'll receive a portion of that interest back. So, if she's in the 25 percent bracket, she'll get back $2,250 in a year.
“If all a sudden the government eliminates the mortgage interest deduction, people will be paying more taxes than they are now,” says Mr. Nicholas. " “It could potentially make owning a home more expensive than it currently is.”
Another possible consequence of the budget negotiations for homeowners would come if Congress does not approve enough cuts to satisfy the ratings agencies. They would downgrade US debt, which would tend to raise mortgage rates, Nicholas says. Standard & Poor's August downgrade of US debt from AAA to AA+ hasn't had that effect, so far at least, because a plunge in stocks has sent investors fleeing to safety. Despite the downgrade, they have piled into US Treasuries.
