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Mitt Romney and the Mortgage Deduction

How the Mortgage Deduction Became an Issue in the 2012 Election


Mitt Romney

2012 Republican presidential nominee Mitt Romney

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Former Massachusetts Gov. Mitt Romney faced scrutiny over his position on the federal mortgage deduction as the Republican Party's presidential nominee in Election 2012. Romney was forced repeatedly to refute suspicions that he was planning to eliminate the popular mortgage deduction to help reduce the national debt and cut the federal deficit.

The mortgage deduction is one of the largest tax breaks enjoyed by American taxpayers. In 2011, for example, taxpayers who claimed the mortgage deduction would have otherwise paid the federal governor nearly $90 billion, according to the Office of Management and Budget. For that reason, talk of eliminating the decades-old tax rule generates lots of attention.

Mortgage Deduction in Election 2012

The issue of whether Romney would try to eliminate the mortgage deduction as president of the United States came up during one of the three presidential debates held in 2012 general election campaign. An undecided voter asked Romney about whether he would keep the mortgage deduction and several other Internal Revenue Service tax rules that benefit the middle class.

Romney did not directly answer the question, but said he intended to simplify the tax code and reduce the overall tax burden for struggling middle-class taxpayers. But he inferred that his plan to cut tax rates across the board by 20 percent while reducing the deficit would require limitations on tax deductions.

Romney Quote on Mortgage Deduction

"Now, how about deductions? Because I’m going to bring rates down across the board for everybody, but I’m going to limit deductions and exemptions and credits, particularly for people at the high end, because I am not going to have people at the high end pay less than they’re paying now," Romney said at a debate with President Barack Obama at Hofstra University on Oct. 17, 2012.

"And so in terms of bringing down deductions, one way of doing that would be to say everybody gets — I’ll pick a number — $25,000 of deductions and credits. And you can decide which ones to use, your home mortgage interest deduction, charity, child tax credit and so forth. You can use those as part of filling that bucket, if you will, of deductions. But your rate comes down, and the burden also comes down on you for one more reason," Romney said.

Romney used the "bucket analogy" several times on the campaign trail to explain his idea of limiting the amount of tax deductions Americans can take advantage of during a single tax year. Before the Oct. 17 presidential debate, for example, he used $17,000 as the cap on deductions.

How the Mortgage Deduction Works

Homeowners in the United States are not required to pay income taxes on money they spend paying interest on their primary home or second home mortgages. The IRS allows taxpayers to claim an itemized deduction for interest paid on a home mortgage, second mortgage, line of credit or home equity loan. Most taxpayers are allowed to deduct the full amount of mortgage interest.

The limits on mortgage deductions are pretty high. The cap is $1 million on interest assessed on the purchase, construction or improvement of a primary residence or second home. The cap is $100,000 on home equity loans and other lines of credit.

A homeowner who earns $54,000 can save $7,500 during the first five years of home ownership, according to estimates from the Tax Policy Center. The deductions save that average taxpayer about $17,000 over the first 12 years of home ownership. The nonprofit, nonpartisan tax group said two-thirds of the tax benefit from the mortgage deduction goes to taxpayers who make less than $200,000 a year.

History of the Mortgage Deduction

The mortgage deduction has been around as long at the tax code, since 1913, according to the Economics and Housing Policy Group of the National Association of Home Builders.

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