What's the mortgage
interest deduction worth to
the typical homeowner who
claims it at tax time?
Nearly $10,000 on average,
according to a provocative
new analysis of federal
incentives for homeowners
nationwide. But there are
many parts of the country
where the "typical" tax
deduction for mortgage
interest is far bigger, and
plenty of others where it is
considerably smaller. Take,
for example, California's
14th congressional district
in and around high-cost
Silicon Valley. The average
taxpayer there took a
whopping $35,000 in mortgage
interest deductions during
the year covered by the
research -- more than six
times the average mortgage
interest writeoff taken
during the same period by
residents of Oklahoma
($5,710).
The homeowners of the
14th district took an
aggregate $3.2 billion worth
of mortgage interest
deductions and that total
was about the same as all
the mortgage interest
writeoffs claimed by all the
homeowners in seven states
-- Alaska, Montana, North
and South Dakota, Vermont,
West Virginia and Wyoming --
combined.
The new research study
by the National Association
of Home Builders used the
latest available IRS tax
data -- tax year 2003 -- and
broke deductions down by the
state and congressional
districts of the taxpayers.
The report was prepared in
part to demonstrate the size
and economic importance of
the mortgage interest and
real property tax writeoffs
to individual congressional
representatives.
To illustrate:
Confronted with the $3.2
billion writeoffs taken by
14th district constituents
in a single year, any savvy
congressman would be loath
to cut back on the
deduction, even to reduce
the federal deficit.
In tax year 2006,
according to estimates by
Congress's joint committee
on taxation, homeowners will
claim a total of $81 billion
in mortgage interest
deductions. By 2009, the
writeoffs are expected to
hit $100 billion a year. The
deduction is available on
all qualifying principal
residences where the
mortgage amount does not
exceed $1 million and home
equity debt does not exceed
$100,000. As a practical
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homeowners can write off
interest annually on home
mortgage debt totaling $1.1
million.
They can also write
off local real property
taxes paid on a principal
residence during the tax
year without limit. In 2006,
according to congressional
estimates, $15 billion in
"local real" will be
deducted by homeowners.
The highest property
tax deductions, not
surprisingly, go to
homeowners in high tax
areas, especially in the
northeastern states. For
example, the residents of
New York's 3rd congressional
district on Long Island,
took an average $11,884 in
property tax writeoffs
during 2003, a total of
$1.25 billion for the
district. That aggregate
writeoff was more than all
the property tax deductions
taken in 2003 by homeowners
in eight states combined --
Wyoming, West Virginia,
Hawaii, the District of
Columbia, Delaware, South
and North Dakota and
Arkansas. (For federal tax
purposes, the study treated
D.C. as the equivalent of a
state.)
The NAHB research
found that the highest
states for property tax
writeoffs were New Jersey
(an average $6,005 per
homeowner), New York
($5,187), New Hampshire
($4,830), Illinois ($4,129)
and Vermont ($3,845). The
highest states for mortgage
interest writeoffs on
average were California
(($14,217), Hawaii
($12,766), the District of
Columbia ($11,759), Nevada
($11,522) and Washington
($11,223).
The lowest states for
mortgage interest deductions
were Oklahoma ($5,710), Iowa
($6,754), North Carolina
($6,808) and Maine ($6,888).
Jerry Howard,
executive vice president and
CEO of NAHB, said, "The
report shows that millions
of working families around
the nation use and depend
upon these important tax
incentives to help them
maintain their current
standard of living. Because
the mortgage interest and
real estate deductions
significantly reduce federal
tax liabilities for
homeowners, they are
important tools for
promoting homeownership."
The not-so-subtle
message to Congress from
NAHB: Don't mess with these
writeoffs. They're too
important to the people who
elected you - and can throw
you out of office if you cut
their deductions.
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