Fiscal Cliff Problem: What Will Happen To California? - Los Angeles Local News | FOX 11 LA KTTV

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Fiscal Cliff Problem: What Will Happen To California?

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As Washington looks for ways to increase tax revenue to avoid the fiscal cliff, one sacred tax cow may be up for auction.

The mortgage interest tax deduction, used by millions of Americans, may be phased out or capped, and that's causing a stir here in California.

Our investigative producer Heidi Cuda's looking into this.

Since 1913, homeowners have been able to deduct their interest from their taxes.
But as Congress looks at the numbers, it's not liking what it sees: the mortgage interest tax deduction costs the government about a hundred billion dollars a year.

And that's money they'd like back in their pocket.

Current law allows homeowners to deduct the interest paid on mortgage balances up to a million dollars, including second homes and up to $100,000 on home equity loans.

But as the Obama administration works to defuse automatic spending cuts and tax increases set to take effect on January 1, this tax break may finally lose its bulletproof status.

An investment consultant we spoke to says says the impact on california would be felt, but the sky isn't likely to fall.

In 2010, 37 million Americans used the mortgage tax deduction.Some tax experts call this an extravagance we can no longer afford, while real estate watchdogs say the capping of phasing out of the tax break could cripple California's still fragile housing market.

 

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