Panel Mulls Limits on Mortgage Deduction

The president's tax reform commission is considering limiting the mortgage interest deduction as it prepares to send its final recommendations to President Bush by Nov. 1.At a public meeting, the commissioners discussed a proposal to reduce the $1 million mortgage cap on the interest deduction to the Federal Housing Administration single-family loan limits, which vary from $172,632 in low-cost areas to $312,895 in high-cost areas like San Francisco. "Clearly they have no understanding of FHA limits," said National Association of Realtors tax counsel Linda Goold. "If you did one national number, then you create huge regional disparities." A $300,000 house in Alabama is not the same as a $300,000 house in metropolitan Washington or New York, she explained. The NAR opposes a reduction in the mortgage interest deduction. The commissioners are also considering a proposal to scrap the mortgage interest deduction and replace it with a tax credit, but they did not come to a final decision at the Oct. 11 meeting. President Bush directed the commissioners to simplify the tax code while recognizing the "importance of homeownership."