JENNIFER MATTSON and her husband Brian Clark spent months going over the numbers to see if they could afford to buy a house on his freelance video graphic income and her job at a nonprofit.

“It worked out that we could buy for around $525,000,” which would bring the San Anselmo family of four a modest home in Marin, Jennifer said. “Our mortgage would be a couple hundred dollars a month more than our rent, but we could swing it because of the mortgage deduction.”

However, as lawmakers search for revenue to avert the so-called “fiscal cliff,” the popular tax break might be trimmed.

The deduction allows taxpayers to cut their taxable income by the amount of interest they pay on their mortgage loans. For the Mattsons, it means the difference between buying a home or living in an apartment with their two small children. And they’re not the only ones depending on it; in California alone, homeowners deducted $96 billion in mortgage interest in 2007.

“The mortgage interest deduction plays a big role in many of our clients’ decisions to purchase a home,” said David Smadbeck, president of the Marin Association of Realtors. “The housing industry is crucial to the economy right now. A lot of us feel the government would be shooting itself in the foot to mess with the mortgage interest deduction.”

For this and other reasons, the million-member National Association of Realtors is fighting possible cuts tooth and nail. Its chief economist, Lawrence Yun, has said removing the deduction could lower property values 15 percent.

The deduction has long been a sacred cow, with even Ronald Reagan shrinking from touching it during the tax reforms of 1986. Even now, discussions center on lowering the amount, not eliminating the deduction altogether.

“Right now the deduction can be taken for interest on mortgages up to $1 million for a first or second mortgage,” said John McGeough, a Realtor with Coldwell Banker in Greenbrae. “The proposal is to cap it at $500,000, give homeowners a 12 percent tax credit and eliminate the deduction for second homes and home equity loans.

“It (the deduction) affects the amount of mortgage you can qualify for and changes the whole qualifying process,” McGeough said. “Right now if somebody can afford to buy an $850,000 home and borrow $650,000, without that tax deduction they now have $9,000 more expenses.”

It’s easy to see why the deduction is under discussion as lawmakers struggle to find new sources of revenue. The president’s fiscal year 2010 budget reported that, in 2012, the deduction would cost the federal Treasury an estimated $131 billion, more than the total of all outlays by the Department of Housing and Urban Development ($48 billion).

“I think it’s (the deduction) going to be scaled back somewhat, but it is not going to go away,” said Michael Lea, director of the Corky McMillin Center for Real Estate at San Diego State University. Lea favors reducing government involvement in the mortgage market.

Lea acknowledged that reducing the deduction to $500,000 for a primary residence would disproportionately affect high-cost areas such as Marin and the Bay Area.

“You can overcome that by some metro area indexing,” Lea said. “Consideration should be given to regionalizing the deduction limits so there are higher deductions in higher-cost areas and lower ones in lower-cost areas.” The professor believes the home equity interest deduction, which is capped at $100,000, will be eliminated altogether.

“It’s (the deduction) a nicety, there is still some benefit that accrues to you, but I don’t think anybody says the most important reason for buying a home is the deduction,” said Keith Gumbinger, vice president of New Jersey-based HSH Associates, a national mortgage research group. “It’s a consideration, but I don’t think (scaling it back) would change things on a grand scale.”

Jennifer Mattson, the San Anselmo resident seeking to buy a home, doesn’t agree.

“Younger people don’t necessarily think it’s the American Dream to buy a house,” she said. “I don’t know how you can convince young people it’s the dream unless there is that incentive. We couldn’t afford to buy a house without the mortgage deduction.”

The deduction doesn’t just affect first-time buyers.

Gary Hamilton, who with his wife has owned his Novato home for 28 years, said it is something he depends upon.

“It helps me continue to be a homeowner,” Hamilton said. “My tax bite come April 15 would probably be several thousand dollars more.” Referring to the fiscal cliff, he said, “The government is going after the middle class to try to get themselves out of this problem and that’s just not the way to do it.

“I am totally against them modifying it (the deduction) in any way,” the Novato resident said. “This is one of the few things a homeowner can rely on.”

Contact Janis Mara via email at jmara@marinij.com. Follow her at Twitter.com/jmara.