Home Mortgage Deduction Limits Proposed

A panel appointed by President Bush is proposing to cap mortgage interest deductions according to a forumla based on average regional housing prices.

It's a plan intended to level the playing field (and generate increased tax revenue to government). Holders of large mortgages would no longer receive greater tax deductions over moderate income housheholds living in averaged priced housing.

On the plus side, the proposed law would lessen the incentive under current tax law for homeowners to always seek higher priced housing, removing one of the pressures that rewards urban sprawl.

Given that capital gains tax rules have changed, including lesseing the tax on the gain on the sale of an existing home, presumably people moving to St. Louis from higher priced areas can "buy-down", still get a comparable or superior home, and pocket most (if not all) of the gain on the sale of their old residence tax free.