The Housing Market and Mortgage Interest Deduction

Mortgage interest deduction is integral to the housing market, over 75% of American taxpayers benefit from this deduction. If you own your home, pay a mortgage, you can claim this deduction – as long as you itemize your taxes.

The savings

Having a tax deduction makes home ownership more attainable and affordable because it lowers the amount of tax you pay and puts more money in your pocket. If you spend less on housing, you have more more money to put in saving or to spend on other things (and this drives the economy).
When homes are more affordable, more people are able to stop renting and buy their first home.

The future of mortgage interest deduction

In past years, the mortgage interest deduction has come under attack. President Obama’s newly proposed budget  would limit how much interest we could deduct – this amount would depend on which tax-bracket the home owner is.

In the past, Congress tried to  lower or completely eliminate this deduction, but luckily, they never succeeded.

Is this deduction fair?

Those who oppose this tax break say that it is not fair because it is mostly helping the wealthy and well-to-do. High-income earners are  likely to itemize their deductions thus benefit from this tax deduction. .

However, taxpayers who don’t itemize deductions, still benefit from the so-called “standard deduction”.

Obviously, people don’t buy homes because of the mortgage interest deduction. However, homeownership is the basis for community involvement and wealth-building.

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