Watch Your Purses, Homeowners, Congress is Eyeying Your Cash

Like powerful wizards with the potential to zap money from our pockets with a wave of a vote,  Congress - in its desperate search for cash - may just help itself to a stash that's always been reserved for us homeowners.  

See when we buy our houses, most of us borrow the bulk of the money we'll need - that's a mortgage loan, of course. Then, month by month, we pay that loan back with interest. At the beginning of the payback - a few years after buying the home - the amount we pay back in interest is thicker than the amount we pay for principal.

But that's okay!!! We never minded, you know, because we've always been allowed to subtract those interest payments from our overall tax bill. If we were in the 25 percent tax bracket, we could lower our tax bill by 25 cents for every dollar we paid in mortgage interest. It's a neat little thing called the "mortgage tax deduction" and it's exactly what makes buying a home such a financially good idea. Without it, our taxes be higher and - on top of that - we'd have to pay rent.

Well those tax bills could soon jump afterall, warns economist Robert Dietz, who works with the National Association of Home Builders. He's sticking up for us in Congress right now, telling them to keep things as they are. That's because those leaders are thinking about swiping that hefty tax deduction and replacing it with a flat 12 percent credit.

"There would be winners and losers," explains Dietz, "And this would most likely hurt the younger home-buyer but help those with little to no mortgages - whose homes are practically paid off. Then there's the other problem: it will put a downward pressure on home prices." 

What can you do? Find out where your Senators and House Representatives stand this November because the decision is slated for December.

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