What is the Mortgage Interest Deduction?
The Mortgage Interest Deduction (MID), as described by the Internal Revenue Service, is “any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, a second mortgage, a line of credit or a home equity loan.”
Why the Mortgage Interest Deduction is important?
Since the creation of the Mortgage Interest Deduction in 1946, home ownership has grown to 66%. During this time, Americans have accumulated roughly $9 trillion in equity in their homes spurring the American economy.
Policy makers in both parties have long supported robust initiatives to encourage homeownership as a way to increase wealth for working families, strengthen communities and help people achieve the American Dream.
Having a tax deduction for mortgage interest makes owning a home more affordable. It allows homeowners to have more disposable income for savings or other household expenses. Simply put, limiting or eliminating the deduction will hurt middle-class homeowners and kill the American dream of homeownership for others.
WHO BENEFITS FROM THE MORTGAGE INTEREST DEDUCTION?
Working families from coast to coast depend on the Mortgage Interest Deduction. The MID makes homeownership more affordable, because the deduction lowers the amount of taxes you pay. Here are some other statistics about who benefits from the MID:
What would be the impact of eliminating the Mortgage Interest Deduction?
Housing economists have studied the potential impact of the Mortgage Interest Deduction on homeownership rates if eliminated. The consensus concluded that:
Mortgage Interest Deduction and the American Dream
The federal government has historically played a crucial role in ensuring that the housing sector has sufficient capital to meet mortgage demands. The various insurance programs and the implicit guarantee of Government Sponsored Enterprises (GSE’s) obligations, acted as an interest subsidy that has made housing more affordable for all homebuyers.
The recent recession has exposed some flaws within the housing market, but overreacting will hurt the housing market further and make the American dream of homeownership harder to attain.