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Mortgage Interest Deduction allows homeowners to reduce their taxable income by deducting the amount paid in mortgage interest. Learn how it can benefit housing and homeownership, check out the IRS rules and guidelines, download ebooks explaining the law, and find out why there is opposition to it.
Mortgage Interest Deduction Basics
The 2022 Mortgage Interest Deduction: Your Guide to Limits and Qualifications (Rocket Mortgage, Jul. 11, 2023)
“The mortgage interest deduction is a tax incentive for homeowners. This itemized deduction allows homeowners to subtract mortgage interest from their taxable income, lowering the amount of taxes they owe. This deduction can also be taken on loans for second homes as long as it stays within IRS limits.”
Could a Boost in The Standard Deduction Kill the Mortgage and Charitable Deductions? (Tax Policy Center, Jun. 12, 2023)
“For example, if Congress wants to subsidize home ownership at all, it could turn the mortgage deduction into a credit for all homebuyers, not just those who take out big mortgages.”
Mortgage Interest Deduction: What You Need to Know (Mortgage Professional America Magazine, Apr. 18, 2022)
“If you claim the mortgage interest deduction on Schedule A of Form 1040, you will need to itemize rather than take the standard deduction when you file your taxes.”
How Does the Mortgage Interest Deduction Benefit Housing and Homeownership?
Your House Can Give You Extra Money Back on Your Taxes. Here's How (CNET, Apr. 12, 2023)
“Mortgage interest -- or the amount of interest you pay on your home loan yearly -- is one of the most common tax deductions for homeowners. It's also often the most lucrative, particularly for new homeowners whose payments generally go more toward loan interest during the first years of a mortgage.”
Top Tax Advantages of Buying a Home (Investopedia, Feb. 16, 2023)
“In January, after the end of the tax year, your lender will send you Internal Revenue Service “You can deduct your home mortgage interest on the first $750,000 ($375,000 if married filing separately) of mortgage debt. The old limit—$1 million ($500,000 if married filing separately)—applies if you bought your home before Dec. 16, 2017.”
Making Sense of the Mortgage Interest Deduction (Guaranteed Rate, Feb. 21, 2022)
“The best way to know which deduction is right for you, and how to take advantage of it, is to talk to a tax professional. “
Why Homeownership Should Continue to Be Incentivized by Our Federal Tax System
(Rosen Consulting Group/National Association of REALTORS®
, Feb. 2020)
As homeowners build equity the increased wealth leads to greater consumer spending that spurs business activity and provides a positive multiplier effect that creates jobs and income throughout the economy. Every 10% increase in total housing market wealth would translate to approximately $147 billion in additional consumer spending, or 0.8% of GDP, as well as billions of dollars in new federal tax revenue.
Why Is There Opposition to the Mortgage Interest Deduction?
5 Little-Known Facts About Taxes and Inequality in America (Center for American Progress, Aug. 30, 2022)
“The mortgage interest deduction similarly is skewed toward the rich. The average amount deducted is $13,061 for those with at least a seven-figure income, $2,886 for those with a six-figure income, $274 for those with a five-figure income, and just $33 for those making a four-figure income or less.”
Audit: Mortgage Tax Break Costs Oregon $500 Million Annually, Mostly Helps Wealthy White Homeowners (Oregon Capital Chronicle, Mar. 16, 2022)
“Oregon doesn’t collect information about race or identity on tax returns. However, auditors determined that most benefits flow to people who are white or Asian and not Hispanic, based on the demographics of Oregonians who own homes and make more than $100,000 annually.”
Racial Inequities In the Mortgage Interest Deduction (Enterprise Community Partners, Aug. 25, 2021)
“The MID, however, provides little benefit to BIPOC homeowners, and instead draws resources away from other policy options that could be used equitably support and facilitate homeownership for those who have been long denied it.
Misdirected Housing Supports: Why the Mortgage Interest Deduction Unjustly SubsidizesHigh-Income Households and Expands Racial Disparities
(National Low Income Housing Coalition/Brandeis
, May 2021)
Eligibility for the MID is selective and exclusionary. A household needs to own a home with a documented mortgage with a lender, excluding renters and homeowners without mortgages. Under these eligibility criteria, the MID advantages white households who have consistently higher rates of
homeownership than households of color. The historic high homeownership gap between white and Black/Latino households further exacerbates the inequitable racial distribution of the MID. The MID aids households that have already experienced many advantages throughout the past century.
The Contradiction at the Heart of Housing Policy (Sightline Institute, Feb. 25, 2021)
Finish off the mortgage interest deduction and the state and local tax deduction by phasing them out over a decade—or making them moot by further raising the standard deduction.
The Mortgage Interest Deduction: Tax Subsidy for The Rich Must Go (Sacramento Observer, Jan. 22, 2021)
Households with at least six-figure incomes receive more than four-fifths of the total value of mortgage interest and property-tax deductions. And it doesn’t stop there: The mortgage interest deduction applies to second homes and/or vacation homes too! So the rich get away with deducting up to $2 million yearly from their state taxable income. Even the Trump administration thought that the MID cap was excessive and capped the federal deduction at $750,000 per home.
Rules, Forms, & Guidelines from the IRS on Mortgage Interest Tax Deduction
Can I Deduct My Mortgage-Related Expenses? (Internal Revenue Service, Apr. 7, 2023)
“This interview will help you determine if you're able to deduct amounts you paid for mortgage interest, points, mortgage insurance premiums, and other mortgage-related expenses.”
Home Mortgage Interest Deduction—Publication 936 (Internal Revenue Service, Dec. 12, 2022)
“This publication discusses the rules for deducting home mortgage interest.”
eBooks & Other Resources
The following eBooks and digital audiobooks are available to NAR members:
The Complete Dictionary of Mortgage & Lending Terms Explained Simply : What Smart Investors Need to Know (EBSCO eBook)
The Complete Idiot's Guide to Mortgages (eBook)
The Everything Guide to Mortgages Book (eBook)
How to Have a Stress Free Mortgage : Insider Tips from a Certified Mortgage Broker to Help Save You Time, Money, and Frustration (EBSCO eBook)
Mortgage Confidential : What You Need to Know That Your Lender Won't Tell You (EBSCO eBook)
Mortgage Confidential (eBook)
Mortgage Myths (eBook)
Mortgage Rip-offs and Money Savers (eBook)
Mortgages 101 (eBook)
Mortgages For Dummies® (eBook)
How to Invest in Real Estate & Pay Little or No Taxes (eBook)
The Home Mortgage Book (eBook)
The Mortgage Answer Book: Practical Answers to More Than 150 of Your Mortgage and Loan Questions (eBook)
The Mortgage Encyclopedia: The Authoritative Guide to Mortgage Programs, Practices, Prices and Pitfalls (eBook)
Mortgage Management for Dummies (Audiobook)
The Tax Lady's Guide to Beating the IRS and Saving Big Bucks on Your Taxes (eBook)
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