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http://finance.yahoo.com/photos/money-photo--1325175966.html

5 Tax Breaks on the Chopping Block

The mortgage-interest deduction

Though it’s one of the more popular tax breaks, the mortgage-interest deduction frequently comes up in conversations about raising revenue. Given the state of the housing market, it’s unlikely this break would disappear completely, but lawmakers could decide to scale it back in a number of ways, says Keith Gumbinger, a mortgage analyst at HSH. One option is to reduce the cap on the amount of mortgage debt that can be factored into the deduction from $1 million to, say, $500,000. Congress might also limit the deduction to one’s primary residence, and not allow it to be used for second homes. And Congress could decide to phase out the interest deduction for those earning above a certain income. The tax savings for those who take advantage of the perk can be significant: The first-year deduction on a $400,000 30-year mortgage with a fixed rate of 3.75% is $14,874, says Gumbinger. As with other itemized deductions, changes here would impact higher earners more than low- to middle-income households, which are more likely to use the standard deduction, he says.