Congress nears deal to extend tax breaks

WASHINGTON (AP) -- Congress is finally getting around to extending more than 50 popular tax breaks that expired at the end of last year, including money savers for homeowners, businesses and shoppers in states with no income tax. Lawmakers want to raise taxes on investment fund managers to help cover the cost. Legislation combining the tax breaks with more aid for people who have been unemployed for long stretches is expected to come up for a vote in the House next week.

U.S. tax burden at lowest point in years


The U.S. tax burden has shrunk to its lowest level in 60 years, the Bureau of Economic Analysis said. Including state, federal and local taxes -- with sales tax and property tax thrown in -- the average tax bill came out to 9.2 percent of personal income in 2009, USA Today reported Tuesday. That's down from an average of 12 percent over the past 50 years

Mortgage Interest Tax Deduction

The tax savings from deducting mortgage interest can be substantial. No wonder it is one of the most popular tax deductions in America.

 

Although this tax break is very popular, it comes at some cost to the government. From the years 2009 to 2013, the government will lose out on approximately $600 billion in tax revenue because of this deduction.

The deduction heaps great savings especially on homeowners who have large monthly interest payments — those in larger homes and in affluent neighborhoods. For that reason, the deduction currently has an upper limit of $1 million. That upper limit ensures that the benefit is not overly regressive.

Some lawmakers have called for that limit to be lowered, a decision that would boost tax receipts considerably.

But in reality, this is not a tax break that the government is thinking about getting rid of. Ending this benefit would harm too many people. In 2008, 72 percent of Americans with a mortgage claimed this deduction. The tax benefit is seen as a major contributor to growth in home ownership.  Home ownership remains an important goal for the federal government and for most Americans.

If you pay interest on a mortgage you should definitely consider the benefit of this deduction the next time you file. You will be joining tens of millions of Americans who are already taking advantage.  You can claim the home mortgage deduction by filing Form 1040 and by itemizing deductions on Schedule A.