CHLA Mortgage Interest Credit Proposal


December 2017


  • 15 % non-refundable tax credit for the amount of combined qualified mortgage interest, property taxes, and charitable deductions that exceed $13,00 [$6,500 for individuals].

[OPTION:  Although more complex and costly, the proposal could be modified to allow a 22%  and a 24% tax credit for taxpayers in those respective tax brackets]

  • Qualified expenses include:

(a)   Mortgage interest on up to $750,000 in combined mortgages on 1st and 2nd homes.

(b)   Up to $10,000 in property taxes on 1st and 2nd homes.

(c)    Up to $10,000 in qualified charitable deductions.

(d)   Up to $10,000 in state and local income taxes (note: no credit is allowed on these taxes directly, but they may be used to meet the 13,000/$6,500 threshold).

  • Credit only available for taxpayers that use the standard deduction [no double dipping].
  • IF the conference report eliminates the AMT, the credit phases out by 2 % for each $1,000 of AGI over a certain threshold (e.g. $250,000 for couples, $125,000 for individuals) – in order to mimic the current tax.
  • Provisions sunset whenever individual tax changes sunset (eg., 2026 if Senate bill].



     1. The proposal is targeted in its design.  It thus achieves the following key objectives:

 (1)   Restores home purchase tax incentives for over 90% of homeowners that lose the use of the mortgage interest deduction under the tax bill.

(2)   Results in a net overall tax cut to over 90% of taxpayers experiencing a net tax increase in the tax bill (accomplished by mirroring the way deductions now taken].

(3)   Reduces the net cost of the proposal – avoiding windfalls through features such as:

 (a) Setting a threshold equal to the current standard deduction.

(b) Phasing out the benefit by AGI, to somewhat mirror AMT treatment of deductions.

(c) Making the credit non-refundable, for treatment comparable to current deduction.

(d) Capping qualified state/local income & property taxes, as tax bill does for deductions

(e) Capping the maximum qualifying mortgage amount, as tax bill does.

(f) Capping charitable deductions.

(g) Sunsetting the credit at the same time individual tax provisions sunset.

2. The proposal is relatively simple – simpler even than the current IRS form used to calculate taxes on dividends and capital gains.   The taxpayer simple adds up the four qualifying items, subtracts $13,000/$6.500, and takes a 15% credit for this amount against taxes otherwise due. 




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