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1 Scott Eastman & Anna Tyger, The Home Mortgage Interest Deduction 1 (October 2019)

handle is hein.taxfoundation/hommtin0001 and id is 1 raw text is: 

The Home

Mortgage Interest Deduction

Scott Eastman  Anna Tyger
Federal Research Manager Research Assistant

No. 671
Oct. 2019

Key   Findings

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*  Currently, the home mortgage  interest deduction (HMID) allows itemizing
   homeowners   to deduct mortgage  interest paid on up to $750,000 worth
   of principal, on either their first or second residence. This limitation was
   introduced by the Tax Cuts and Jobs Act (TCJA) and will revert to $1 million
   after 2025.

*  In 2018, less than 4 percent of taxpayers earning less than $50,000 will claim
   the deduction, and these taxpayers will receive less than 1 percent of the tax
   expenditure's overall benefits. Taxpayers making over $200,000 will make up
   34 percent of claims and take 60 percent of the benefits.

*  Though  the HMID  is viewed as a policy that increases the incidence of
   homeownership,   research suggests the deduction does not increase
   homeownership   rates. There is, however, evidence that the deduction
   increases housing costs by increasing demand for housing.

*  Prior to the TCJA, the tax code largely treated the decision to save in owner-
   occupied  housing or consume one's income neutrally. The tax code achieved
   this by allowing home mortgage  interest deductibility, letting capital gains
   realized on the sale of owner-occupied housing go largely untaxed, and not
   taxing imputed rent.

*  The TCJA's reduction in the HMID's cap increased the effective marginal
   tax rate on owner-occupied housing, particularly for debt-financed housing.
   These  changes disadvantage homeowners   who  rely on debt to finance their
   homes  and increase the cost of saving in owner-occupied housing.

*  Policies that narrow the difference in effective marginal tax rates between
   owner-occupied  housing and  other forms of capital would improve economic
   efficiency. Making the deduction a tax credit would allow low-income
   taxpayers who  don't itemize to benefit from this provision.

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