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Nation: Wealthy Benefit Most From Federal Housing Subsidies

Nation: Wealthy Benefit Most From Federal Housing Subsidies

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By    |   Wednesday, 06 July 2016 06:00 AM

People who own a home and deduct mortgage interest payments from their income taxes enjoy greater housing incentives than low-income people who rent, The Nation says.

“Two of the largest homeownership tax programs—the Mortgage Interest Deduction and the Property Tax Deduction—cost $90 billion in 2015,” according to the left-leaning magazine. “All told, households making over $100,000 a year received nearly 90 percent of the $90 billion spent on the two tax programs … Households making less than $50,000 got a little more than 1 percent of those benefits.”

The argument that renters subsidize homeowners is nothing new, and has stirred debate on how to reform the mortgage interest deduction, one of the most popular givebacks among taxpayers. The discussion pits groups that benefit from the sales and construction of over-sized houses — including Wall Street banks, realtors, developers, construction workers and materials companies — against reformers who cite research that says the deduction doesn’t boost the homeownership rate. That rate has fallen since a 2004 peak.

“As nonsensical as it sounds, the value of homeownership tax support goes up as your income goes up. In addition, higher-income households get bigger deductions when they buy bigger houses,” the Nation says. “The top 0.1 percent of earners—folks with an average annual income of more than $9 million—get an average of $1,236 per month (nearly $15,000 per year) from just these two homeownership tax programs.”

The Nation says the mortgage interest deduction could be replaced with a system that more directly helps low-income Americans.

“We could redirect this spending to help lower-income Americans save for a down payment, or use some of these funds to create a first-time-homebuyer credit, or create a simple refundable credit for all homeowners,” according to the magazine.

 Meanwhile, the tax benefits of owning versus renting can be less some people expect, according to Bill Bischoff at MarketWatch.

“Most individuals find themselves in the standard deduction mode until they buy a home. Then they finally have enough itemized deductions (mainly due to mortgage interest and property taxes) to exceed the standard deduction,” he writes. “However, only the incremental amount of itemized write-offs (excess of total itemized deductions over the standard deduction) actually does you any tax-saving good.”

He says prospective homeowners need to consider that difference between the standard deduction and mortgage interest deduction in their tax planning.

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People who own a home and deduct mortgage interest payments from their income taxes enjoy greater housing incentives than low-income people who rent, The Nation says.
homeowners, wealth, tax, mortgage
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2016-00-06
Wednesday, 06 July 2016 06:00 AM
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