Mortgage Interest Deduction Facts

There is some talk that the mortgage interest deduction, or some portion of it, is on the table for a cut in the grand bargain over the debt ceiling debate.  Here are some figures on the mortgage interest deduction (MID):

• About a third of all Americans itemize their tax deductions instead of claiming the lump-sum standard deductions.  Many of these itemizers do so to claim the MID, and the fact that they can claim the MID makes itemizing a better choice for them than the standard deduction.  In fact, more than 80 percent of those who itemized claimed the MID.
• More than half of home owners claim the MID.  Surprised that the figure isn’t higher?  The MID can only be claimed by homeowners who pay mortgage interest, and nearly a third of home owners own their homes free and clear—without any debt.  Among mortgaged properties, more than 80 percent claim the MID.  The less than 20 percent who do not claim the MID are likely long-time home owners who have nearly paid off their mortgage and receive a larger tax deduction by claiming the standard deduction than by claiming a deduction for the little mortgage interest that they pay.
• Among those who take MID, about two-third of all families earn less than $100,000.
• Homeowners already pay about 80 to 90 percent of all federal income tax.
• Many policy wonks in Washington are calling a cut to MID a virtual cut in government spending because it is a cut in something called tax expenditure.  The everyday people will disagree with this type of Washington language because their tax bill will be rising.  It is a tax increase for American homeowners.