- Experts often cite the fact that only about half of homeowners take a deduction for mortgage interest (MID) on their taxes each year. Technically speaking, this information is not wrong, but is it useful?
- In the chart, calculations of 2008 data show that the share of homeowners taking the MID vary quite a bit from state to state—from a high of over 70 percent in the District of Columbia (DC) and Maryland to a low of less than 25 percent in West Virginia (middle column).
- The chart also highlights one of the factors driving that statistic—free and clear homes or homes owned without a mortgage (first column).
- Nationally, about 32 percent of homes were owned outright—without a mortgage. This also varies from state to state. West Virginia has the highest share of homes owned outright, just 2 percent shy of half. This contrasts with California, Colorado, Maryland, DC, and Nevada where less than a quarter of owner-occupied homes were owned outright.
- Finally, there is a group of homeowners that has a mortgage but chooses not to take the MID (the third column). Nationally, this group is only about 17 percent of homeowners, but also varies from a high of greater than 30 percent in 5 states to less than 5 percent in Maryland, New Jersey, and DC.
- Owners choosing not to take the MID likely live in a very low cost area or live in a moderate to high cost area and have owned their home for several years. In either case, they likely do not pay enough mortgage interest and other deductible expenses to exceed the standard deduction threshold and therefore choose to take the standard deduction instead. Other deductible expenses such as state and local taxes paid, charitable contributions made, and medical expenses would affect this decision as well.
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