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Facts and Perceptions on the Mortgage Interest Deduction

According to Fiscal Fact No. 49 from the Tax Foundation:

“Despite recent attempts by real estate, home building, and mortgage-lending organizations to portray the home mortgage interest deduction as vital to middle-income family budgets, an analysis of data from the Internal Revenue Service tells a different story.

“The most recent IRS data show few low- and middle-income taxpayers benefit from the home mortgage interest deduction. Those who filed tax returns with under $30,000 in adjusted gross income (AGI) in 2003 received just 9 percent of deductions for home mortgage interest, despite filing 52 percent of all tax returns. (The median taxpayer’s AGI was approximately $29,000 in 2003.) In contrast, 36 percent of home mortgage interest deductions were claimed by taxpayers with AGIs over $100,000.”

In summary, the Tax Foundation writes:

“Despite the claims of various industry groups that the home mortgage interest deduction is an important factor promoting broad-based home ownership, IRS data show the bulk of mortgage interest deductions are claimed by a relatively small fraction of Americans with incomes well above average. As a result, it is likely that the deduction primarily encourages larger and more expensive homes among a relatively small share of taxpayers, rather than promoting broad-based home ownership among ordinary Americans.”

Sure seems as if a flat tax would reduce the tax filing burdens of a great many American taxpayers.

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