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Mortgage-interest deduction: Should it stay or should it go?

Jennifer Gonzalez

Jennifer Gonzalez

How many of you own a home? If so, do you have a mortgage? And finally, if you have a mortgage, are you familiar with mortgage-interest deduction?

If you’ve bought and sold homes in the past, you’re probably aware of a tax code exemption that permits you to deduct mortgage interest paid on mortgage debt up to $1 million on a primary and secondary residence if you itemize. The $1 million limitation represents the combined allowable debt on two residences. Home equity loans or lines of credit up to $100,000 also qualify for the deduction, according to the Ada County Association of Realtors.

A national debate about eliminating or revamping MID is under way, and that’s not sitting well with the real estate community.

Shirley Hicks, associate broker with Remax Elite in Boise, said getting rid of it would be devastating to any economic recovery with the housing market.

“Having it provides a tax break, which is a huge incentive,” Hicks said.

Ada County Association of Realtors Director of Public Policy Miguel Lagarreta said if it were to be slashed, it could contribute to a 15 percent immediate drop in home values. He called it a “middle class issue” and a “disincentive” for current or future homeowners.

Several economists I spoke to disagreed, saying not only does MID not promote homeownership, but it doesn’t benefit most people anyway.

Eric Toder, co-director of the The Urban Brookins Tax Policy Center in Washington, D.C., said Australia, Canada and the United Kingdom don’t have MID, yet have about the same rates of homeownership as the United States. He also said 65 percent of homeowners don’t itemize, and aren’t eligible for the deduction.

“This doesn’t encourage homeownership, because most of the people in the mid- to upper income level can afford a home to begin with,” Toder said.

He said it instead encourages Americans to buy bigger, more expensive homes which “isn’t exactly desirable social policy.”

Northwest Nazarene University Economics Professor Peter Crabb said economists generally support getting rid of MID entirely.

“It’s basically a tax break for the rich and it encourages households to take on more debt,” Crabb said.

What are your thoughts about MID? Should it be left alone? Is it time for it to be nixed? Or could it stand for an overhaul? You can read my full story on MID here, or in Friday’s Idaho Business Review, and I am eager to hear your thoughts about it.


Jennifer Gonzalez covers construction, real estate and development for the Idaho Business Review and Idaho Construction Review. She can be reached at jennifer.gonzalez@idahobusinessreview.com.

About Jennifer Gonzalez

Jennifer Gonzalez covers construction, real estate and development news. Contact her at jennifer.gonzalez@idahobusinessreview.com or 208.639.3515.

One comment

  1. I think that Professor Crabb meant to say that the MID is a tax deduction for the middle class, not the rich. Certainly wealthier individuals take advantage of it, but the policy is designed solely to expand homeownership at more moderate income levels.