Rep. Keith Ellison (D-Minn.) has introduced legislation that would convert the federal mortgage interest deduction (MID) to a tax credit, with a portion of the expected savings going toward the National Housing Trust Fund.
The Common Sense Housing Investment Act of 2015 (H.R. 1662) would change the MID to a 15% flat rate tax credit on interest paid on mortgages up to $500,000.
Because the mortgage deduction requires homeowners to itemize their tax deductions, less than half of all homeowners currently deduct interest on their mortgage, according to Ellison.
The bill, a reintroduction of a failed earlier proposal, would cap the amount of a home mortgage eligible for a tax break at $500,000, down from the current cap of $1 million. Only about 4.5% of all mortgages taken out from 2011 to 2013 were for over $500,000.
These two changes will expand the number of homeowners who would receive a tax break on their mortgages from 39 to 55 million. Virtually, all the 16 million additional homeowners who would benefit have incomes under $100,000 a year, says the National Low Income Housing Coalition (NLIHC).
Supporters say the changes will save an estimated $230 billion over 10 years and direct the savings to provide more affordable homes for the lowest income families, those who are priced out of the housing market.
The bill would direct 60% of the new savings to the National Housing Trust Fund. It also seeks to invests the new revenue in expanding the low-income housing tax credit, Sec. 8 rental assistance, and the public housing capital fund.
“With the new resources generated by Mr. Ellison’s bill, we can end homelessness and help ensure that every child, senior citizen, and person with a disability in America has a decent, stable, and affordable home,” said Sheila Crowley, NLIHC president and CEO. “Moreover, we can do this without costing the federal government any more money, without adding to the deficit.”