Home Mortgage Interest Credit Act of 2026
- Sponsor
- Rep. Latimer, George [D-NY-16]
- Committees
- Ways and Means Committee (primary)
- Last action
- Jul 14, 2026
Bottom line
The bill creates a new, capped, and income-limited tax credit for home mortgage interest, aiming to provide direct tax relief to homeowners, particularly those in middle-income brackets, by converting a deduction into a more progressive credit.
What it actually does
This bill amends the Internal Revenue Code of 1986 to establish a new, nonrefundable tax credit for qualified residence interest paid or accrued by taxpayers. The credit is capped at $2,000 per year ($1,000 for married individuals filing separately) and includes an income-based phase-out mechanism. It also explicitly prohibits taxpayers from claiming both this new credit and any other deduction or credit for the same qualified residence interest.
Proponents argue
Proponents would argue that this bill makes homeownership more affordable and equitable by converting the existing mortgage interest deduction, which disproportionately benefits higher earners, into a direct tax credit. This credit would provide a uniform dollar-for-dollar reduction in tax liability, offering greater relative financial relief to lower and middle-income homeowners and potentially stimulating the housing market.
Opponents contend
Opponents might contend that the bill adds complexity to the tax code, creates a new federal expenditure that could significantly impact federal revenue, and that the $2,000 cap is too low to provide meaningful relief for homeowners in high-cost-of-living areas. They may also argue that the income phase-out thresholds could still exclude many middle-class families, depending on their geographic location.
The bill is concise and clearly structured, allowing for a relatively quick and straightforward evaluation by an informed reader.
Section 2(a), new Section 25G(a)
Creation of Qualified Residence Interest Credit
This provision establishes a new tax credit, Section 25G, allowing taxpayers to claim a credit against their federal income tax for the total amount of 'qualified residence interest' paid or accrued during the taxable year. Unlike a deduction, which reduces taxable income, this credit directly reduces the amount of tax owed, providing a more direct financial benefit to eligible homeowners, subject to specific limitations outlined elsewhere in the bill.
Supporters argue
Supporters argue that a tax credit is more equitable than a deduction, as it provides the same dollar benefit to all eligible taxpayers regardless of their marginal tax rate, thus offering greater relative relief to lower and middle-income homeowners.
Critics contend
Critics might argue that introducing a new credit adds complexity to the tax code and could be a significant revenue loss for the federal government, potentially requiring cuts elsewhere or increased borrowing.
Tradeoffs
This provision balances the goal of providing broad homeowner relief with concerns about federal revenue impact and the potential for increased tax code complexity.
Section 2(a), new Section 25G(b)
Defining Eligible Mortgage Interest and Residences
This section defines 'qualified residence interest' as interest on 'acquisition indebtedness' for the taxpayer's 'qualified residence.' Acquisition indebtedness includes debt incurred to acquire, construct, or substantially improve a principal residence, secured by that residence, and refinanced debt up to the original amount. A 'qualified residence' is explicitly defined as the taxpayer's principal residence, aligning with existing tax law definitions.
Section 2(a), new Section 25G(c)
Credit Cap and Income Phase-Out
This provision sets a maximum credit amount of $2,000 per year, reduced to $1,000 for married individuals filing separately. It also introduces an income-based phase-out: the credit is reduced by $20 for every $1,000 (or fraction thereof) by which the taxpayer's modified adjusted gross income (AGI) exceeds a threshold. These thresholds are $300,000 for joint filers/surviving spouses, $200,000 for heads of household, and $150,000 for other filers.
Section 2(a), new Section 25G(d)
Prohibition on Dual Tax Benefits
This section explicitly states that no other credit or deduction under the Internal Revenue Code shall be allowed for any qualified residence interest that is used to determine the credit under this new Section 25G. This prevents taxpayers from claiming both the new credit and the existing mortgage interest deduction for the same interest payments, ensuring that taxpayers do not receive a double tax benefit for the same expense.
This provision mandates that the dollar amounts specified in subsection (c) (the $2,000 and $1,000 credit caps, and the $300,000, $200,000, $150,000 income thresholds) will be adjusted for inflation for taxable years beginning after 2027. The adjustment will be based on the cost-of-living adjustment determined under section 1(f)(3) of the IRS Code, using calendar year 2026 as the base year.
Section 2(a), new Section 25G(e)
Why it matters:This is standard legislative practice for indexing tax provisions to inflation, ensuring their value isn't eroded over time. It is a technical detail rather than an attempt to obscure a provision.
Case for: Supporters argue that inflation indexing is crucial for maintaining the real value of the credit and its income thresholds over time, ensuring that the benefit continues to reach its intended recipients and is not eroded by rising costs of living.
Case against: Opponents might argue that automatic inflation adjustments reduce future legislative flexibility to revisit and potentially reduce the credit's generosity or adjust its targeting based on economic conditions without requiring new legislation.
Estimated impact: Ensures the credit's real value and eligibility thresholds are maintained over time, potentially increasing federal revenue loss in future years compared to a non-indexed credit.