How much does the Mortgage interest deduction really save us?

[exboyfil]

27. Would we be willing to eliminate the deduction for future mortgages?

Home values would take an immediate hit, but current homeowners will have nothing change on their taxes. Another possibility is to cap the home mortgage value at $300,000 to $500,000 for deductability (not sure how much additional tax revenue would be generated though). You could also have deductability reside in different buckets (all charitable is deductible and could be combined with a lower standard deduction). Medical expenses should definitely go into a different bucket anyway. It is shameful that some of the most vulnerable have the least access to this deduction.

For me giving it up is not a big deal. I am at 2.75% now on my mortgage and, at $100,000, my marginal tax rate it does not represent that much money. Since I take full advantage of my state's 529 (exempting $11K of my income from state taxes) my state income tax burden is high but still combined with property taxes and charitable leaves an amount lower than the standard deduction. That means that only a portion of the $2,750 that can be deducted is effective (figure approx. 30% tax rate savings is probably around $600).

I remember doing this calculation several years ago when I calculating the full value of the mortgage deduction. It turned out that very little savings was had from having it in place (I earned alot less back then). I have always lived in relatively low housing expense states though (Iowa and Tennessee). Since Tennessee did not have a state income tax (and this was before you could use the sales tax as a deduction), the mortgage interest deduction met little to me. I noticed realtors did not consider this when they tried to sell homes (of course they would not).