What would happen to home values in the event that popular real estate deductions for mortgage interest and local property taxes were cut significantly? It’s an issue you’re likely to hear more about as Congress and the Obama administration wade into tax reform negotiations heading into 2013.

Some of the forecasts are scary: Any significant reductions in these long-established tax benefits would trigger declines in home values. Under some circumstances, they could be well into the double digits – 15 percent, according to Lawrence Yun, chief economist of the National Association of Realtors. “That’s how much we can expect values to fall as buyers discount the value of the deduction in their purchase offers,” Yun says.

Other projections are more nuanced: Other potential features of a final tax compromise could counteract the loss of deductions, softening the net impact on values. Plus no one on Capitol Hill is talking about eliminating the mortgage interest or property tax write-offs, just capping them in some way for higher-income individuals.

So what can you believe? Here’s a quick overview. Start with the basics. Both President Obama and some Republicans hinted during pre-Thanksgiving discussions that they might be open to raising revenues by limiting unnamed deductions and “loopholes” in a tax reform package next year.

When it comes to deductions for taxpayers who itemize, there are hardly any bigger than the mortgage interest write-off and local real estate property taxes. They are perennially high on the list of reformers who seek to streamline the sprawling federal tax code.

For much of his first term, President Obama advocated putting a cap on deductions by upper-income taxpayers – singles with more than $200,000 in adjusted gross incomes and joint-filing married couples with income in excess of $250,000. Under Obama’s plan, these taxpayers could not take deductions beyond the 28 percent marginal bracket level, even though they might be in the 33 percent or 35 percent brackets. Mortgage interest, real property taxes, charitable and other write-offs would be affected by such a cap.

A 2010 study for the Tax Policy Center of the Brookings Institution and the Urban Institute sought to model the effects of Obama’s tax reform proposals for fiscal 2011 – limiting mortgage interest and property tax deductions to the 28 percent bracket level, and the simultaneous increase in the highest-income tax brackets back to the levels existing before 2001. In one scenario, when taxpayers in the 33 percent bracket had their mortgage interest deductions limited to 28 percent, with no other tax changes, housing values dropped by 6.9 percent to 15 percent, according to the study. The restrictions would have the heaviest effects on houses in areas of the country with relatively high local tax rates and where the costs of renting a home or apartment are favorable when compared with the costs of purchasing – including California and portions of the East Coast.

The author of the study, Benjamin H. Harris, said in conclusion that “while none of the president’s proposed tax reforms are directed at changing the value of housing, it is clear that under certain assumptions, the proposals would have dramatic effects on housing prices.”

The reference to “certain assumptions” is key here. Nobody knows what shape tax reform – if it occurs in 2013 – will take: how drastically housing benefits are pared back, how long a transition period is provided and what other elements in the final deal might serve to cushion the impact on homes, such as by spurring more vigorous economic growth, lower federal deficits and debt.