One of the benefits to homeownership has long been the ability to deduct any interest paid on your mortgage on your federal tax return. But with the so-called fiscal cliff looming in the new year, some folks in Washington are considering putting the deduction on the chopping block — or at least on a diet.

Every year, mortgage-interest deductions cost the U.S. around $100 billion, so they would seem like one huge cluster of low-hanging fruit for revenue-harvesting legislators to pick.

The White House-appointed Simpson-Bowles fiscal commission has already suggested capping the mortgage amount at $500,000 (it’s currently $1 million) and not allowing taxpayers to deduct interest payments for mortgages on second homes or equity lines of credit.

Some say the interest deductions are a luxury that mostly benefit wealthy homeowners with large mortgages.

USC law professor Edward Kleinbard tells the Washington Post, “It’s very much a subsidy to those Americans who need it least.”

The chief economist for Moody’s argues that since many homeowners factor in these deductions when they purchase a house, taking away the deductions will lower house prices. He does, however, believe that in the long-run it will better for everyone if the federal government can avoid driving off that fiscal cliff — and that changes to the mortgage-interest deduction will be a part of whatever plan the administration and Congress ultimately choose.

Understandably, the National Association of Realtors is not thrilled.

“It has always been NAR’s position that the [mortgage-interest deduction] is vital to the stability of the American housing market and economy,” the president of the National Association of Realtors, said in a statement. “And we will remain vigilant in opposing any future plan that modifies or excludes the deductibility of mortgage interest.”

Whatever changes are made to the mortgage-interest deduction, they will likely not be immediate and will be phased in over the course of the next few years.

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