End near for mortgage interest subsidy?

Red jigsaw puzzle piece shaped like a house

As the federal government looks for more ways to ease the deficit through spending reductions, expect a flurry of new cost-cutting ideas.

Among the items suggested for the chopping block both by conservative think tanks and President Obama's own deficit commission is the mortgage interest tax break offered to homeowners.

That deduction saves homeowners on average $3,050 a year, according to the National Association of Realtors, one of the groups fighting to keep the subsidy used by tens of millions of Americans.

Another group lobbying to keep the deduction is the National Association of Home Builders, which claims any change in how much homeowners can deduct from their taxes would hurt the middle class and the recovery of the fragile housing market.

But there doesn't appear to be any urgency to settle the matter.

House Majority Leader Eric Cantor, R-Va., entered the debate in March saying "there's not a lot of support for getting rid of the mortgage deduction" among members of Congress.

Still, some advocates of repeal say the deduction is actually harming the real estate market.

Robertson Williams, a fellow at the Tax Policy Center, last year told The New York Times: "What the subsidy is doing is driving up prices by encouraging well-off people to take out bigger loans, to buy bigger houses."

The mortgage tax deduction is a perk for those of us who own a home, but haven't paid off our loan. It is also extraordinarily popular among taxpayers, a key consideration among lawmakers intent on cutting the federal budget.

Yet, it is a huge potential source of revenue -- $131 billion – the government is ignoring each year, an equally alluring consideration.

Even if Congress decides not to act, don't expect the debate to end soon. There's just too much money at stake.

Follow Interest.com on Twitter.