The Mortgage Interest Deduction

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The Short Version of What Every REALTOR® Needs to Know about Housing Tax Incentives
Danielle Hale – May 16, 2013

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The Mortgage Interest Deduction

  1. 1. The Mortgage Interest DeductionThe Short Version of What EveryREALTOR® Needs to Know aboutHousing Tax IncentivesDanielle Hale – May 16, 2013
  2. 2. US Publicly Held Debthas exceeded 75% of GDP050001000015000200002500030000Publicly Held Debt New Debt (Deficit) GDPSource: OMB, Haver
  3. 3. MIDsince191319132013Other taxsituations…Loopholes?
  4. 4. 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 amortgage
  5. 5. 35 to 40 Million Tax Filers Claim the MortgageInterest Deduction each year05,000,00010,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,0002007 2008 2009 2010 2011
  6. 6. MID claimers are roughly ¼ of tax filers, ½ ofhome owners, and ¾ of mortgaged home owners27% 27% 26% 26% 24%55%51% 49% 49% 48%81%75% 73% 73% 72%32,000,00034,000,00036,000,00038,000,00040,000,00042,000,00044,000,0000%10%20%30%40%50%60%70%80%90%2007 2008 2009 2010 2011Number of MID Filers Share of All Tax FilersShare of Home Owners Share of Mortgaged Home Owners
  7. 7. How many people take the MID as compared toother popular tax provisions?A. CharitableB. Child Tax CreditC. Qualified DividendsD. Ordinary DividendsE. Real Estate Tax Deduction
  8. 8. There are slightly more RE Tax than MID claimseach year, and roughly the same number ofcharitable claims depending on the year.010,000,00020,000,00030,000,00040,000,00050,000,000010,000,00020,000,00030,000,00040,000,00050,000,0002007 2008 2009 2010 2011Number of MID Filers CharitableChild Tax Credit Qualified DividendsOrdinary Dividends Real Estate Tax Deduction
  9. 9. The life-cycle hypothesis at work in housing:• The life-cycle hypothesis suggests that consumers try tosmooth consumption over their lifetime• Nearly 90 percent of recent home buyers financed ahome purchase– Nearly all recent home buyers under age 44 financedtheir home purchase while only roughly half of those65 or older did so– Typical first-time buyers financed 96 percent of theirhome purchase while repeat buyers financed 87percent
  10. 10. Financing with a fully amortizing fixed-ratemortgage has 2 key implications:$-$100$200$300$400$500$600$700$800$900$1,0001 3 5 7 9 11 13 15 17 19 21 23 25 27 29Monthly Interest Monthly PrincipalConstantMonthlyPaymentsDecreasingInterestPayments
  11. 11. The typical MID beneficiary is:• Under 45• Married• With Kids• Earning less than $200,000
  12. 12. Home Ownership is Not A Loophole

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