Currently, homeowners can deduct the interest payments on their mortgage from earned income, on mortgages up to $1,000,000. There is a proposal floating around in Washington to reduce that amount to $500,000, and some discussion on whether it should be eliminated entirely.
The Seattle Times reprinted a piece yesterday that appears to be preparing the path toward this end, suggesting that eliminating the deduction would allow tax rates to fall for everybody.
What has not been mentioned in this discussion is that owners of rental property have no limits as to how much mortgage interest they can expense. Essentially, this proposal would make homeowners the only class of property owner for whom mortgage interest would not be deductible. Your landlord would be able to deduct mortgage interest, but you, as an owner-occupant? Nope.
According to the article, “only” 25% of taxpayers “benefit” from the homeowner mortgage interest deduction. Which, we suppose, makes it an easier target.
In our view, eliminating the mortgage interest deduction would penalize home ownership, and promote landlording. As both homeowners and landlords, we think this is unfair to homeowners and would discourage home ownership.
Now, if Washington wants to eliminate mortgage interest expensing for everyone, well, that’s a different discussion altogether.