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The Mortgage Interest Deduction â€" Why it Matters

The mortgage interest deduction has been a cornerstone of American housing policy since the inception of the tax code more than 100 years ago.

The mortgage interest deduction, which is sometimes called the MID, has been a cornerstone of American housing policy since the inception of the tax code more than 100 years ago. It supports the aspirations of families at all income levels to become home owners, and Americans overwhelmingly oppose any action by Congress to tamper with the deduction.

 

   The Home Builders Association of Greater Chattanooga (HBAGC) and the National Association of Home Builders (NAHB) supports homeownership and rental housing incentives in the current tax code, specifically the deductions for mortgage interest and state and local property taxes as well as provisions that encourage development of affordable housing. HBAGC and NAHB believes that the mortgage interest deduction and other housing tax incentives have helped the U.S. create the best-housed nation on earth. 

 

   The mortgage interest deduction helps make the tax code more progressive and primarily benefits middle class taxpayers. Data from the Congressional Joint Committee on Taxation shows that 82 percent of households who benefit from the mortgage interest deduction have incomes of less than $200,000.

 

   Repealing the MID would have serious economic consequences. Almost all studies examining the elimination of the mortgage interest deduction find that it would reduce demand for housing by raising taxes on prospective home buyers. This reduction in housing demand would also lower home values for existing home owners who would experience a significant loss in wealth.  A 1 percent decline in home prices would result in a loss of $200 billion to American households. Just a 5 percent decline would eliminate $1 trillion in household net worth.

 

   Clearly, the MID is a critical part in the decision-making process of buying a new home.  HBAGC, with strong support from NAHB, is committed to working with local, area and state policymakers to ensure the MID remains in place and is available for those wishing to take advantage of this economically beneficial tax deduction.