Wednesday, July 20, 2011

Bipartisan tax plan trims mortgage deduction

The plan would simplify the tax code by reducing the number of tax brackets from six to three, lowering the top rate from 35 percent to somewhere between 23 percent and 29 percent. That could provide a windfall for wealthy taxpayers because the 35 percent tax bracket currently applies to taxable income above $379,150.
To help pay for lower rates, the plan would reduce popular tax breaks for mortgage interest, health insurance, charitable giving and retirement savings. Other tax breaks would be spared, including the $1,000-per-child tax credit and the earned income tax credit, which helps the working poor stay out of poverty.
What are the details....not fore sure.
he Gang of Six plan does not specify how the tax breaks would be trimmed. Democrats have several proposals that would restrict wealthy families' use of the breaks, while preserving them for most low- and middle-income taxpayers. Such a plan would offset rate cuts for high-income families by limiting their ability to take advantage of various tax breaks.
For example, current law allows homeowners to deduct the interest they pay on home mortgages of up to $1 million. One proposal would lower the limit to $500,000 and exclude mortgage interest on second homes.
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