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The St Louis Contrarian

Providing Independent and Intelligent Insight on St. Louis Public Policy Issues

Archive for the category “mortgage lending”

Homeownership Tax Deduction

I hate to ever agree with the Trump administration but here goes. They are in favor of limiting the homeownership tax deduction to $500,000 annually. This is a good start. This deduction mostly favors wealthier people. Furthermore research has shown it does not stimulate the purchase of housing but drives up the price. Another largely white upper middle class entitlement. Written by Paul Dribin

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Mortgage Interest Deduction

The mortgage interest deduction on federal income tax is by far the biggest housing subsidy available. It far surpasses Section 8, LIHTC, or other forms of subsidy. The major problem with this subsidy is because it primarily benefits higher income households. That is because a tax deduction only benefits households who itemize and those with a more substantial tax burden. Most of the benefit of this deduction goes to households earning over $200,000 a year. This program hurts central cities more than suburbs for the following reasons:

1. As stated before, less expensive houses provide less of a deduction to affluent purchasers. The present system actually provides incentives for middle and upper middle income households to buy more expensive homes which are generally located in suburbs.

2. Renters who are more common in the central city receive not subsidy at all.

The National Low Income Housing Coalition has a United for Homes campaign which attempts to rectify the housing tax deduction issue. The policy they advocated would limit deductions to $500000 of interest, and provide a 15% tax credit to households which would much more adequately address the needs of lower income homeowners. The billions in cost savings would be used to subsidize new affordable housing. Check out the website Unitedforhomes.org

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