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The Mortgage Interest Deduction
The Short Version of What Every REALTOR® Needs to Know about
Housing Tax Incentives Danielle Hale – May 16, 2013
US Publicly Held Debt has exceeded 75% of GDP
20072008
20092010
20112012
20132014
20152016
20172018
20192020
20212022
20230
5000
10000
15000
20000
25000
30000
Publicly Held Debt New Debt (Deficit) GDP
Source: OMB, Haver
MID since 1913
1913
2013
Other tax situations… Loopholes?
How many people take the MID?
A. Roughly 35 to 40 million tax filersB. Roughly a quarter of all tax payersC. Roughly half of all home ownersD. Roughly three-quarters of home
owners with a mortgage
35 to 40 Million Tax Filers Claim the Mortgage Interest Deduction each year
2007 2008 2009 2010 20110
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
MID claimers are roughly ¼ of tax filers, ½ of home owners, and ¾ of mortgaged home owners
2007 2008 2009 2010 20110%
10%20%30%40%50%60%70%80%90%
32,000,000
34,000,000
36,000,000
38,000,000
40,000,000
42,000,000
44,000,000
27% 27% 26% 26% 24%
55%51% 49% 49% 48%
81%75% 73% 73% 72%
Number of MID Filers Share of All Tax FilersShare of Home Owners Share of Mortgaged Home Owners
How many people take the MID as compared to other popular tax provisions?
A. CharitableB. Child Tax CreditC. Qualified DividendsD. Ordinary DividendsE. Real Estate Tax Deduction
There are slightly more RE Tax than MID claims each year, and roughly the same number of charitable
claims depending on the year.
2007 2008 2009 2010 20110
5,000,00010,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,00050,000,000
05,000,00010,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,000
Number of MID Filers CharitableChild Tax Credit Qualified DividendsOrdinary Dividends Real Estate Tax Deduction
The life-cycle hypothesis at work in housing:
• The life-cycle hypothesis suggests that consumers try to smooth consumption over their lifetime
• Nearly 90 percent of recent home buyers financed a home purchase– Nearly all recent home buyers under age 44
financed their home purchase while only roughly half of those 65 or older did so
– Typical first-time buyers financed 96 percent of their home purchase while repeat buyers financed 87 percent
Financing with a fully amortizing fixed-rate mortgage has 2 key implications:
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 $-
$100 $200 $300 $400 $500 $600 $700 $800 $900
$1,000
Monthly Interest Monthly Principal
Constant Monthly Payments
Decreasing Interest Payments
The typical MID beneficiary is:
• Under 45• Married• With Kids• Earning less than $200,000
Home Ownership is Not A Loophole