Homeownership is part of the American dream. The United States tax code has numerous provisions to incentivize residential real estate investment, and the home mortgage interest deduction is one of the most well known. However, the deduction is not cheap for the U.S. government, and it is under scrutiny as the government attempts to increase the amount of revenue it takes in.
Readers in Worcester, Massachusetts, might already know that the mortgage tax deduction costs the U.S. Treasury approximately $108 billion a year. Those in favor of getting rid of the deduction emphasize that it tends to be used by people in wealthier areas. The Internal Revenue Service data supports this position, demonstrating that the use of the deduction increases in high-cost areas but is rarely claimed in low-cost housing areas. Furthermore, data shows that half of the interest deducted in the country is from homeowners making $100,000 or more.
Housing associations support the deduction -- citing its popularity. The National Association of Home Builders has conducted a poll showing that 73 percent of the public opposes any change to the deduction. In some of the states with the highest housing prices, people can claim a deduction, on average, of around $12,000.
Massachusetts readers should pay close attention to Congress, as politicians are forced to make difficult budget decisions impacting the U.S. Tax Code. For those who currently use the deduction or are looking to buy a home, the deduction is a palpable benefit. Yet even those individuals who own their house should realize that the mortgage deduction might increase the amount of money a prospective buyer is willing to pay.
Source: USA Today, "Mortgage deduction is popular, but few claim it," Gregory Korte, Dec. 5, 2012