Who pays the price if congress cuts mortgage deduction

Republican leaders recently offered reassurances that when Congress tackles taxes this fall, the mortgage interest deduction will be protected. This begs the question: Who really benefits

from it? The vast majority of people see no tax benefit from the deduction, because just 20 percent of filers use it, according to the Urban-Brookings Tax Policy Center. And if Republicans

successfully deliver generous increases in the standard deduction while eliminating other deductions, its utility could decline even more. "At that point, very few people would claim

the mortgage interest deduction," said Joseph Rosenberg, a senior research associate at the Tax Policy Center. "It may be the case that a lot of taxpayers wouldn't care if it

went away, but it's a politically difficult thing to touch." In an analysis of the GOP tax plan released last year, the Tax Policy Center estimated that of the 45 million filers

who itemize, 38 million, or 84 percent, would opt for the $24,000 standard deduction proposed under the Republican plan because it would exceed the combined value of other deductions

available to them. The tax break for mortgage interest has remained unchanged since the Tax Reform Act of 1986, when it survived the legislative ax to deductions for other forms of consumer

interest (such as on credit card debt). The provision generally lets taxpayers deduct the interest on mortgage debt up to $1 million, along with interest on home-equity debt up to $100,000.

To claim it, you must itemize deductions on your tax return, which only about a third of taxpayers do. Of those one-third, 74 percent take the mortgage interest deduction, according to the

Tax Policy Center. WHO USES THE MORTGAGE INTEREST DEDUCTION, BY INCOME INCOME RANGE* # OF FILINGS TOTAL AMOUNT 0 to $50,000 2.32 million $1.11 billion $50,000 to $100,000 9.77 million $9.19

billion $100,000 to $200,000 14.6 million $24.85 billion $200,000 & up 7.18 million $29.78 billion Totals: 33.87 million $64.93 billion _Source: Source: 2016 data from Joint Committee on

Taxation report. *Income ranges include AGI plus variety of untaxed items (i.e., employer contributions to health care plan, nontaxable social security benefits, etc.)_ The biggest benefits

tend to go to higher-income taxpayers. The 7.18 million filers with incomes of $200,000 or more who claim the deduction will reduce their taxable income by an aggregate $29.78 billion this

year, according to recent tax expenditure estimates released by the congressional Joint Committee on Taxation. In comparison, the 14.6 million filers with incomes of $100,000 to $200,000

will save less: $24.85 billion. Filers with incomes below that have even smaller tax savings. Another group of taxpayers who find the deduction appealing are those in high-cost housing areas

such as New York or San Francisco. COST OF SELECT TAX DEDUCTIONS DEDUCTION COST 2016-2020 Mortgage interest $357 billion State and local taxes $368.8 billion Charitable contributions*

$230.5 billion Property taxes $180 billion Medical & long-term care expenses $56.6 billion Student loan interest $11.9 billion Teacher classroom expenses $1.2 billion _Source: Source:

Joint Committee on Taxation Jan, 30, 2017 report *Excludes education- and health-related donations_ Often, taxpayers in high-cost ZIP codes also claim other deductions, including those for

property taxes and state and local income taxes. It's unclear whether those deductions and others will remain as legislators identify ways to offset promised tax cuts with new sources

of tax revenue. The deduction for mortgage interest is among the most expensive individual tax breaks, costing an estimated $357 billion in revenue from 2016 through 2020, according to Joint

Taxation Committee's recent report. President Donald Trump's one-page tax plan released in April and the 35-page GOP tax reform blueprint released last year included elimination

of all deductions except those related to charitable contributions and mortgage interest. Since then, however, rumors have swirled on Capitol Hill that while the deduction might not go away,

the cap on interest could be lowered to mortgage debt of $500,000, which would echo a provision in a Republican draft bill in 2014. Ericsphotography | Getty Images Supporters of the

deduction include the National Association of Realtors, which says any changes would harm homeowners whether they have a mortgage or not. The group released a study in May showing that if

elements similar to GOP's plan went into effect, home values would fall by more than 10.2 percent on average in the near term. The study also found that homeowners with income of

$50,000 to $200,000 would face an average tax increase of $815 while non-homeowners in that range would get an average tax cut of $516. Kathryn Hauer, a certified financial planner with

Wilson David Investment Advisors in Aiken, South Carolina, said it's not just wealthy homeowners who like the mortgage interest deduction. She sees plenty of middle-class households

where two earners bring in a combined $80,000 or so annually and rely on the break every year. "For many homeowners, taking a deduction for that mortgage interest cost, which can be

thousands of dollars, really helps lower their tax burden," Hauer said. WATCH: SHILLER COMMENTS ON THE MORTGAGE INTEREST DEDUCTION