However, the data indicate that may be bad tax planning advice these days.
In a recent Forbes article, the Director of Economic Research at Reason Foundation, Anthony Randazzo, and professor of economics at Florida Gulf Coast University, Dean Stansel, note that the average benefits from the MID are not enough to make a significant difference between renting and homeownership.
Data from the Congressional Joint Committee on Taxation indicate that, in 2012, 34.1M homeowners claimed $68B in MID. In 2010, MID benefits totaled $83B for 33.6M homeowners.
But, those MIDs didn't really help middle class homeowners:
- Most of the 2012 MIDs went to people making $100k+ salaries. In fact, households that earned $100k+ claimed 77.3% of the total MIDs, essentially the same as in 2010.
- In 2012, households earning between $30k and $40k benefited an average of $49/month. Households making between $40k and $50k benefited $54/month. The difference makes sense because households with higher incomes are likely to have larger mortgages. But, these two groups households represented only 8% of MID claims.
For the most part, the data indicate that MIDs benefit a narrow group of upper-income households. Moreover, in 2012, only 25% of all taxpayers claimed a MID in 2012. Why so small? Only 32 percent of taxpayers itemize deductions and of those taxpayers, 79% claim the MID. Guess who is more likely to itemize? Bingo! Upper-income households.
So, the MID assists a small number of taxpayers, mostly of whom live in upper-income households.
If the goal of the mortgage interest deduction is to increase or assist middle class homeownership, the data indicate that it's time to rethink the policy.
Another reason for the flat tax!
Let the discussion begin...
To read Anthony Randazzo and Dean Stansel's article in Forbes, click on the following link:
"Mortgage Interest Deduction Saves Middle Class Taxpayers All of $51/Month."