Could the mortgage interest deduction get chopped after all?

Officials considering $600K cap

US homes and Treasury Secretary Steve Mnuchin
US homes and Treasury Secretary Steve Mnuchin

The mortgage interest deduction is the annoying aunt of entitlements: once through the door it’s just impossible to get rid of. At least that used to be the conventional wisdom. Now the Trump administration is about to test it.

According to unnamed real estate industry sources, federal officials and lawmakers are toying with the idea of capping the entitlement, which allows households to deduct mortgage payments from their income tax, at a loan amount of $600,000, CNBC reported. Currently the deduction is capped at $1 million for two people filing jointly and at $500,000 for a single filer.

“Saying they aren’t going to get rid of it isn’t saying they won’t touch it,” a source told CNBC. “There are clearly discussions going on around reducing the maximum of the mortgage interest deduction to the $600,000 range.”

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Lowering the cap to $600,000 would lower the number of beneficiaries by 4 percent but reduce the deduction’s overall cost by 15 percent, according to CNBC. The benefit cost the treasury around $77 billion in 2016.

The Real Deal recently published a column arguing that the deduction tends to hurt poor renters by driving up the cost of housing. [CNBC]Konrad Putzier