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(Updated July 2012)
Introduced along with the Income Tax in 1913, the Mortgage Interest Deduction (MID) allows homeowners who itemize their taxes to deduct mortgage interest attributable to primary residence and second-home debt totaling $1 million, and interest paid on home equity debt up to $100,000. Though the MID is a popular tax deduction for millions of U.S. homeowners, it has become a controversial topic in recent years. This field guide highlights basics, perceived pros and cons, IRS rules, and more to get you up-to-speed on this widely-debated tax deduction.
MID Basics
Mortgage Interest Deduction topic page, (National Association of REALTORS®, 2012).
Debt and Deficit: A Public Opinion Dilemma, (Pew Research Center, June 14, 2012).
Rethinking the Mortgage Interest Deduction, (Video from the Tax Policy Center, Urban Institute and Brookings Institution, July 29, 2011).
The Misunderstood Mortgage Interest Deduction, (Economix Blog, The New York Times, June 15, 2011).
Home Mortgage Interest Tax Deduction, (About.com, May 27, 2011).
What's the Future of the Mortgage-Interest Deduction?, (Wall Street Journal, May 18, 2011).
History of the MID
Biography of a Dream, (Mortgage Banking, July 2011). Q
SOI Bulletin Historical Table 7: Tax Years 1950-2009, (IRS.gov, Apr. 13, 2011). Itemized deductions were used in 19% of tax returns in 1950, and more than doubled by 1960. In 1970, itemized deductions hit a highpoint of almost 50%.
SOI Tax Stats - SOI Bulletins, (IRS.gov, June 14, 2011). Since 1986, the MID has been used in roughly 25-30% of income tax returns each year, according to individual Income Tax Returns data.
The Mortgage Interest Deduction: Background and Statistics, (National Association of Home Builders, Mar. 2012).
The Accidental Deduction: A History and Critique of the Tax Subsidy for Mortgage Interest, (UC Davis School of Law, Nov. 2009).
Historical Federalist Perspective on the Home Mortgage Interest Deduction for Federal Income Tax, (Journal of Business & Economic Research, June 2010). Q
How Does the MID Benefit Housing and Homeownership?
Unmasking the Mortgage Interest Deduction: Who Benefits and by How Much?, (Reason Foundation, July 2011).
Mortgage Interest and Real Estate Tax Deduction Facts, (Economists' Outlook blog, National Association of REALTORS®, Dec. 7, 2010).
Another Challenge to the Mortgage Interest Deduction, (Speaking of Real Estate blog, Dec. 1, 2010).
Why the MID Deserves to Stay, (REALTOR® Magazine, Sept. 2010).
Mortgage Interest Deduction Vital to Housing Market, (HouseLogic.com, Jan. 11, 2010).
Why is There Opposition to the MID?
The Distributional and Revenue Consequences of Reforming the Mortgage Interest Deduction, (National Tax Journal, Dec. 2011). Q
Who Benefits from the Mortgage Interest Deduction? Wealthy Suburbanites, (The Weekly Standard Blog, Dec. 21, 2011).
Chart of the day: Where does the mortgage-interest deduction go?, (Reuters, July 12, 2011).
Despite Benefit Disparities, Middle Class Supports Mortgage Deduction, (The New York Times, July 13, 2011).
Rebuild the Path to the American Homeownership, (Washington Post, Sept. 3, 2010).
Reforming the Mortgage Interest Deduction, (Tax Policy Center, Apr. 2010).
Rules, Forms, & Guidelines from the IRS
Topic 504—Home Mortgage Points, (IRS.gov, July 21, 2010).
Home Mortgage Interest Deduction: Publication 936 (for use in preparing 2010 returns), (IRS.gov, Nov. 30, 2010).
The IRS, MID and You
NAR Issue Summary: Federal Tax/Mortgage Interest Deduction, (National Association of REALTORS®, 2012).
Revenue Costs and Incentive Effects of the Mortgage Interest Deduction for Owner-Occupied Housing, (National Tax Journal, June 2011). Q
Americans Oppose Eliminating Income Tax Deductions, (Gallup.com, Apr. 15, 2011).
eBooks & Other Resources
eBooks.realtor.org
The following ebooks and digital audiobooks are available to NAR members:
How to Invest in Real Estate & Pay Little or No Taxes (Adobe eReader)
J.K. Lasser's New Tax Law Simplified 2010 (Adobe eReader)
J.K. Lasser's 1001 Deductions and Tax Breaks 2010 (Adobe eReader)
The Mortgage Answer Book: Practical Answers to More Than 150 of Your Mortgage and Loan Questions (Adobe eReader)
The Mortgage Encyclopedia: The Authoritative Guide to Mortgage Programs, Practices, Prices and Pitfalls (Adobe eReader)
The Tax Lady's Guide to Beating the IRS and Saving Big Bucks on Your Taxes (Adobe eReader)
Field Guides & More
These field guides and other resources in the Virtual Library may also be of interest:
Field Guide to Buying vs. Renting
Field Guide to Due Diligence for First Time Home Buyers
Field Guide to Social Benefits of Home Ownership
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