In November 2005, the President's Advisory Panel on Tax Reform recommended converting the mortgage interest deduction into a tax credit and significantly reducing the amount of a mortgage that would be eligible to receive tax benefits. These two proposals represent a significant tax increase for homeowners. In addition, the Panel recommended completely eliminating the mortgage interest deduction for second homes and for home equity loans and lines of credit. The deduction for property taxes would also be repealed. While these proposals appeal to some economists, they are very controversial. This proposal would likely cause the value of all housing to fall, but would be particularly unfair in high cost areas.
NAR's position
Housing is the engine that drives the economy, and to even mention reducing the tax benefits of homeownership could endanger property values. Home prices, particularly in high cost areas, could decline 15 percent if recommendations to convert the mortgage interest deduction to a tax credit are implemented