What will happen to you if home mortgage tax break ends?

July 28, 2011

Aside from getting a piece of the American dream, one of the reasons people ostensibly buy homes in the U.S. is for a nice tax break. About 35 million households claimed the mortgage interest deduction in 2009, according to a recent report from the Joint Committee on Taxation.

In fact, the mortgage interest deduction is the largest subsidy for homeowners and the nation’s third-largest tax break, according to the Center for American Progress, a liberal policy research group.

But the mortgage interest deduction also costs the U.S. Treasury about $100 billion a year, which is why lawmakers are looking for ways to abolish it in the debt crisis negotiations.

The dirty secret is that the home mortgage tax deduction does very little to encourage the middle class and less wealthy to buy homes, a Brookings-Urban Tax Policy Center study found. “The largest tax expenditures accrue to those households with the highest incomes as they are more likely to own homes, are more likely to itemize deductions, face higher tax rates and have larger mortgages,” the Joint Committee on Taxation says.

The average benefit to a middle-income taxpayer (making $50,000 to $75,000) is $1,227, while the average benefit for a high-income taxpayer (above $200,000) is $6,650, writes Reuters tax columnist Amy Feldman. Taxpayers who earned $75,000 or less received just 18 percent of the tax benefit, while taxpayers who earned more than $100,000 got two-thirds of the tax break.

So what will happen if Congress does away with the home mortgage deduction to bolster the nation’s coffers? We want to hear how it will impact you: Are you less likely to buy a home? Would you consider renting? Would you move to a state with lower taxes to compensate? Is the home tax deduction part of your financial plan? Please rant, vent and comment here.

4 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

[…] Reuters Blogs (blog) […]

Posted by The Dirty Little Secret Of Tax Reform – Forbes (blog) | Finance Today | Report as abusive

They need to change the rules not eliminate the tax break. Limit it to homes under $500,000 or incomes under $150,000 and to first homes only. I moved to the US from Canada and lower taxes were one of the reasons. Take these breaks away and it’s not so appealing to stay any longer.

Posted by rulez | Report as abusive

[…] eyed to help cut debtReutersThe Dirty Little Secret Of Tax ReformForbes (blog)AdvisorOne -Reuters Blogs (blog) -Budget & Tax Newsall 27 news […]

Posted by Mortgage Interest Deduction on the Chopping Block? – Miller-McCune.com | Financial News One | Report as abusive

[…] break eyed to help cut debtReutersTop 10 Biggest Tax Breaks: What to Cut to Trim Deficit?AdvisorOneReuters Blogs (blog) -Budget & Tax News -Houston Chronicleall 27 news […]

Posted by Mortgage Interest Deduction on the Chopping Block? – Miller-McCune.com | Finance Today | Report as abusive

[…] the original: What will happen to you if home mortgage tax break ends? | Reuters … This entry was posted in Blogs and tagged budget, congress, economy, employment, financial, […]

Posted by What will happen to you if home mortgage tax break ends? | Reuters … | First Source Solutions | Orange County | HAFA Short Sales | Realtor | Report as abusive

[…] eyed to help cut debtReutersThe Dirty Little Secret Of Tax ReformForbes (blog)AdvisorOne -Reuters Blogs (blog) -Budget & Tax Newsall 27 news […]

Posted by Mortgage Interest Deduction on the Chopping Block? – Miller-McCune.com | getmygnews.us | Report as abusive

[…] eyed to help cut debtReutersThe Dirty Little Secret Of Tax ReformForbes (blog)AdvisorOne -Reuters Blogs (blog) -Budget & Tax Newsall 27 news […]

Posted by Mortgage Interest Deduction on the Chopping Block? – Miller-McCune.com | What's New US | Report as abusive

I am not supposed to abide laws of any country that doesn’t truly recognize my actual self because such a country will have violated her laws concerning perjury and if I’ll get any adverse message of any incomplete service, debt or any such, I won’t go downtown but commit torture against people here to make them confess whereabouts of my actual relatives as well as services.

Posted by ta-boo | Report as abusive

[…] the rest here: What will happen to you if home mortgage tax break ends? – Reuters Blogs (blog) Tags: 100-billion, also-costs, are-looking, chopping-block, home-mortgage, interest-deduction, […]

Posted by The Little Real Estate Depot » Blog Archive » What will happen to you if home mortgage tax break ends? – Reuters Blogs (blog) | Report as abusive

[…] south, Monica Luck, 46, argues forcefully for keeping the home mortgage deduction. Luck, who is divorced and bought her home in the Atlanta suburb of Chamblee for around $200,000, […]

Posted by Scrap the mortgage deduction? Americans weigh in | Reuters Money | Report as abusive

[…] south, Monica Luck, 46, argues forcefully for keeping the home mortgage deduction. Luck, who is divorced and bought her home in the Atlanta suburb of Chamblee for around $200,000, […]

Posted by Scrap the mortgage deduction? Americans weigh in | Richard Barrow Utah Mortgage Professional | Report as abusive

This is probably one of the most recognized deductions that taxpayers use, and many people make the decision to buy vs. rent specifically because of it. I agree that some changes need to be made to the existing rule, but eliminating it takes an incentive for purchasing a home completely away. Just offering low interest rates in this country is not going to fix the housing market we are in. AVAILABILITY of credit, and incentives like first time buyer tax credits and interest tax deductions are what is going to fix the housing issues. I discuss many topics like this on my site www.thehomemortgageblog.com. Please come and check it out and encourage comments.

Posted by MortgageGuy | Report as abusive

You has introduced an excellent post. You created your ingredient and not much to talk about. It’s like this wide-spread undeniable proven point that you can not debate with actually not wide-spread, everything has its different. Thanks for this details.
KB Homes

Posted by Helen22 | Report as abusive