In this context, a study by Harvard economist Edward L. Glaeser in 2002 found that the interest deduction encouraged people to borrow more for housing, but found it had minimal impact on the rate of homeownership.

How the homebuyers searching for a suitable property feel about this unexpected incentive? Most said their choice of home would not have changed, even if the tax concessions were not available, but they would have searched elsewhere for cutting their consumption. And several homeowners said they did not consider the tax break, when they shopped for a mortgage and the incentive came as a bonus.

Yet there is apprehension in the minds of many, who availed these tax breaks that the government may take them back at any time. According to Rep. Sam Johnson, R-Plano, there may be pressure coming to the government to scale back tax concessions, as part of a budget-deficit reduction measure. He is a senior Republican on the House Ways and Means Committee and so his saying “Many of these tax expenditures are very popular, and doing away with them might hurt you at home” gets importance.

What is the opinion from the other law makers? Dogget, a senior Democrat on the tax-writing Ways and Means Committee says the most drastic policy option – wiping out all tax breaks – is hardly politically feasible. According to the Tax Policy Center, it would not raise enough revenue to reduce deficits to a sustainable level, if Congress, as expected, extends most of the Bush tax cuts.

However, economists and lawmakers say a more likely solution for this would come from a comprehensive tax reform effort. Reducing existing tax breaks could raise enough revenue that individual and corporate rates could be lowered, making the whole effort more appealing to voters.

It is expected more ideas could come from a bipartisan fiscal commission, appointed to advise Congress on ways to cut the deficit. Let us wait and see.

Looking back in the history –  a deduction for mortgage interest was started to be allowed, when Congress established the modern income tax in 1913. According to the Congressional Research Service, during those days only few Americans owned homes and it was not envisioned that this concession will spur homeownership as of today. As per Joint Committee on Taxation statistics, nearly 37 million American tax filers now use the mortgage interest deduction.

Analysing the statistics provided – this subsidy is being utilized highest in states where housing costs are more – such as California and Hawaii, and being used widely in Texas also. According to Tax Foundation figures in Texas, the average deduction for tax filers claiming the break was $9,955 during the year 2008.

Actually not all home buyers can claim this concession, because the value of the tax break is tied to how much debt one takes on. The tax deduction is not enough to make a difference to their taxes for people buying lower-cost homes and they can use the standard deduction allowed. Renters cannot avail this subsidy. This benefit is mostly applicable for those who buy higher-priced homes – ironically.

According to data compiled by the National Association of Homebuilders, older couples when they pay tax are not the ones to benefit most from this deduction and the average mortgage deduction is recorded highest for home owners in the age group between 35 and 45.

For example in Texas, the average mortgage interest deduction is highest for those earning more than $200,000 – according to Internal Revenue Service data. For those earning less than $50,000 – the average deduction is less by $7,900 to $10,300 than those earning $200,000.

It is reported that proposals are under way in 2011 budget to limit the mortgage interest deduction for families with incomes over $250,000. The National Association of Realtors said the change could trigger yet another crisis in home values, even as we struggle to recover from the first.

The deadline for filing individual tax returns nearing, the government issued a report last Thursday, which contains details of the erroneous credits being granted, arising out of the prevailing confusion at IRS.  The Treasury inspector general for tax administration, J. Russel George, admits in the report that in Making Work Pay Tax credits the IRS gave out $24.2 million as of March 5.

Totally $25 billion worth of credits were issued by the IRS during the period. The error rate is just less than one-tenth of 1 percent to give out wrong credits.

According to the report which covers returns processed by IRS as of March 5, there were nearly 61 million and they expect to receive about 140 million returns this year.

The IRS spokesperson Terry Lemons said whenever there is major tax changes, you will see some confusion over it and assured the IRS is doing “everything they can” to work through problems and to process returns faster.

The stimulus package of Obama government enacted last year posed many challenges and made the tax system – more complex than before. Tax breaks were announced for qualified families while buying new homes.

Congress extended and expanded the home buyer tax credit in November because it was so popular. Home buyers were eligible for tax credit up to $6,500, if they had owned their current homes for over 5 years; first-time home buyers can get up to $8,000. Home buyers have to sign purchase agreements before May 1 and close the deal before July 1 to qualify for this tax credit.

The government report says the fastest way to get tax refund is to file the return electronically and have the refund deposited into your bank account within approximately 10 days.

One of them is Carol Eaton, a resident of Milford and owner of Corp Décor that deals with furniture. She is having a rough time paying taxes and said, “It’s the worst year I’ve ever had for business. I haven’t been buying needless things and I’ve budgeted myself in areas I wouldn’t normally do so.”

Another sufferer is Charlotte Wells of Ansonia who is struggling with medical problems and cannot find the dollars to pay taxes timely. She is listed as one of the 25 top whose taxes are due. Her husband recently had a stroke and although he is recovering he still cannot comprehend all that is going around. Wells said that this has complicated matters as she is concentrating on his health. Till now he used to see to tax matters. Right now he needs continuous supervision and as a result all other issues have taken a back seat.

When taxpayers become delinquent the towns as well as the cities are the first hand sufferers. Last December Bridgeport town had failed to collect over $137 million as taxes. Generally its collection is 97% but so far it has brought in only 48.3% in December 2009.

Anne Kelley-Lenz, the tax collector of Bridgeport said that although in comparison to its own past record its collection is low but in other cities and towns the collection rate is far less. This is because Bridgeport sells its liens on certain types of properties. She said, “We have the ability to sell an asset to a third party and get paid for it. For Bridgeport, it’s a necessity because the city gets paid for any outstanding taxes for the year it’s due.”

Kelley-Lenz that if the city sells the property it is for the best for all concerned. She said, “These liens give the taxpayer an option to set up a payment plan with the new owners of the property. There’s a contract that puts a hold on the foreclosure of the property so the taxpayer can pay the amount owed that the city can’t afford to pay.”

Number three on the tax due list is Wheelabrator that deals with the business of converting waste to energy. This company is contending that its tax dues have been wrongly assessed.