Facts


	The income tax deductions for mortgage interest and real estate taxes primarily benefit middle class taxpayers, and larger benefits are collected by larger households and families, such as those with children.

	Introduced by Rep. Gary Miller of California, H. Res. 25 supports retaining the mortgage interest deduction.

	At present, there are more than 40 co-sponsors for this important resolution.

	There are ways for people to take action in support of the mortgage interest deduction.

	Owners and renters think tax incentives to promote homeownership are reasonable. 72 percent of home owners agree and 82 percent of renters.

	81 percent of the public feels that the mortgage interest deduction should remain in the tax code.

	Support is strong across party lines. 69 percent of Republicans, 70 percent of Independents, and 83 percent of Democrats think it's reasonable to have tax incentives for homeownership.

	70 percent of the public would oppose a political candidate who proposed eliminating the mortgage interest deduction.

	NAHB research reveals that tampering with the mortgage interest deduction would have a disproportionate impact, as a share of household income, on younger home owners.

	Analysis by NAHB experts debunks the myth that the mortgage interest deduction is claimed by a relatively small number of taxpayers and primarily benefits higher-income taxpayers.

	Other housing provisions might be at risk: Home equity loan interest deduction. Property tax deduction. Capital gains tax exclusion. Low-Income Housing Tax Credit. Depreciation for residential rental property.

	More information and news releases can be found at www.SaveMyMID.com.




About the Mortgage Interest Deduction

What is the Mortgage Interest Deduction and Who Benefits from It?

The mortgage interest deduction helps make homeownership more affordable by allowing home owners to deduct the interest that they pay on the mortgage for their home when calculating their annual federal income tax. Contrary to assertions by some economists, the income tax deductions for mortgage interest and real estate taxes primarily benefit middle class taxpayers with incomes between $50,000 and $200,000, according to the findings of a study by the National Association of Home Builders. Taxpayers earning less than $200,000 pay 43 percent of all income taxes. However, they receive 68 percent of the total benefit of the mortgage interest deduction and 77 percent of the total benefit of the real estate tax deduction. Moreover, larger benefits go to larger households and families, such as those with children. And as a share of household income, larger benefits are collected by families with less than $200,000 income, indicating that these tax rules make the tax system more progressive.

The Mortgage Interest Deduction is at Risk

Ever since the federal income tax was introduced in 1913, the government has used the tax code to encourage homeownership. Now, as a result of the effort to reduce the federal deficit, the mortgage interest deduction is under fire. Proposed changes to the tax code would have a dramatic impact on home owners and would significantly reduce the value of this deduction. How would the proposal to eliminate the mortgage interest deduction and replace it with a 12 percent nonrefundable tax credit affect a typical home owner? Suppose a home owner paying $10,000 in mortgage interest in a year faces a marginal tax rate of 25 percent and, to keep things simple, has enough other itemized deductions that they would itemize regardless of the mortgage interest deduction. For that home owner, the mortgage interest deduction is worth approximately 25 percent times $10,000 or $2,500 in reduced taxes paid. With a 12 percent tax credit, the home owner’s tax benefit would be reduced to $10,000 times 12 percent or $1,200. Moreover, if other proposals affecting housing-related deductions went into effect, home owners would not be able to deduct their state and local property taxes or the interest on any home equity loan they might have and they would pay higher tax on a principal residence when sold.

Take Action

A resolution that supports retaining the mortgage interest deduction is pending in the U.S. House of Representatives. Introduced by Rep. Gary Miller of California, H. Res. 25 states that “the current Federal income tax deduction for interest paid on debt secured by a first or second home should not be further restricted.”
At present, there are more than 40 co-sponsors for this important resolution.

Show YOUR support for the mortgage interest deduction and tell your Representative to co-sponsor H. Res. 25:

Call the U.S. Capitol switchboard at 202-224-3121 to reach your Representative's office.
OR
Visit www.House.gov to find your Representative's website and send an e-mail in support of H. Res. 25.

AND BE SURE TO

Thank your Representative if he/she is already a co-sponsor of H.Res. 25 or decides to become a co-sponsor.

30-year fixed, a Staple of U.S. Housing

30-Year, Fixed-Rate Mortgage Must Remain a Staple of U.S. Housing Finance System

Some policy makers and academics believe that government support is no longer needed for the 30-year, fixed rate mortgage, arguing that U.S. housing finance subsidies misdirect the use of capital in the economy.

Nothing could be further from the truth.

The advent of the 30-year, fixed-rate mortgage came about as a result of President Franklin Roosevelt’s New Deal policies in response to the deprivations of the Great Depression when the national homeownership rate was well under 50 percent and buyers were often forced to finance their homes with a 50 percent downpayment on a five-year balloon mortgage.

Over the ensuing decades, the 30-year mortgage played a pivotal role in helping to increase the national homeownership rate so that today two out of three Americans own a home of their own. It became an industry standard for several reasons:

Affordability. These loans are geared toward affordability; 30-year terms lock in low monthly payments, allowing households with average incomes to comfortably budget for their home loan.

Inflation protection. Knowing their monthly housing costs will remain the same year in and year out regardless of whether interest rates rise provides households with a sense of financial security and also acts as a hedge against inflation.

Long-term planning. Many young buyers know that as their incomes rise, their housing costs will stay constant and become less of a burden, enabling them to prepare for other long-term obligations, such as college tuitions and retirement savings.

Tax advantages. In most instances, all of the interest and property taxes you pay in a given year can be fully deducted from your gross income to reduce your taxable income.These deductions can result in thousands of dollars of tax savings, especially in the early years of a 30-year mortgage when interest makes up most of the payment.

The 30-year loan is the most popular and sustainable mortgage in the marketplace. As the private market transitions to assume a greater role, a strong federal backstop is necessary to maintain a stable and adequate supply of credit for home buyers and ensure that the 30-year, fixed-rate mortgage remains readily available to first-time home buyers and working American families.Otherwise private financial institutions will turn the 30-year mortgage into a luxury product, raising interest rates and fees and requiring downpayments of upwards of 20 percent, whichwould price millions of middle-class households out of the market.

Now is hardly the time to step back from our long-standing commitment to housing and the American dream.

About NAHB

The National Association of Home Builders is a Washington, D.C.-based trade association whose mission is to enhance the climate for housing and the building industry. Chief among NAHB’s goals is providing and expanding opportunities for all consumers to have safe, decent and affordable housing. As “the voice of America’s housing industry,” NAHB helps promote policies that will keep housing a national priority.

Founded in 1942, NAHB is a federation of more than 800 state and local associations. About one-third of NAHB’s more than 160,000 members are home builders and/or remodelers. The remaining members are associates working in closely related fields within the housing industry, such as mortgage finance and building products and services.

The association is member-driven, with a professional staff of more than 250 in Washington. More than 2,800 members serve on the association’s board of directors, which elects the association’s Senior Officers and helps set the association’s agenda.

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Media Contacts

Paul Lopez, plopez@nahb.org