Deducting mortgage interest? That could change

This month the nonpartisan Congressional Budget Office delivered its latest revenue-raising options for Senate and House consideration as their members write this fall's tax and budget legislation. Tucked away in the report are several incendiary plans that could — if adopted — cost homeowners billions of dollars. Though not formal legislative proposals, the CBO's options represent a handy fiscal menu for legislators to pick and choose from to reduce the deficit — now at unprecedented levels — or to pay for new programs they might want to advance. Tops on the CBO's list for housing: slash deductions for homeowner mortgage interest from the present $1.1 million limit to $500,000, phased in with $100,000 annual reductions starting in 2013 and extending to 2019. Under current law, taxpayers can write off mortgage interest on their principal home debt up to $1 million, and on home equity debt up to $100,000. Under the CBO's option, that maximum mortgage debt amount would shrink yearly until it hit $500,000. Over a 10-year period, this change alone would boost federal tax collections by an estimated $41 billion.

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