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What is the Mortgage Interest Deduction?

The Mortgage Interest Deduction (MID), as described by the Internal Revenue Service, is “any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, a second mortgage, a line of credit or a home equity loan.”  


Why the Mortgage Interest Deduction is important?

Since the creation of the Mortgage Interest Deduction in 1946, home ownership has grown to 66%. During this time, Americans have accumulated roughly $9 trillion in equity in their homes spurring the American economy.

Policy makers in both parties have long supported robust initiatives to encourage homeownership as a way to increase wealth for working families, strengthen communities and help people achieve the American Dream. 

Having a tax deduction for mortgage interest makes owning a home more affordable. It allows homeowners to have more disposable income for savings or other household expenses. Simply put, limiting or eliminating the deduction will hurt middle-class homeowners and kill the American dream of homeownership for others. 



Working families from coast to coast depend on the Mortgage Interest Deduction.  The MID makes homeownership more affordable, because the deduction lowers the amount of taxes you pay.  Here are some other statistics about who benefits from the MID:


  • More than 75% or 38 million of homeowners utilize the deduction over the period they own their home. (Realtors.org)
  • Homeowners already pay 80% to 90% of the income tax in our country, and among those who claim the Mortgage Interest Deduction, almost two-thirds are middle-income earners. (Houselogic.com)
  • More than 60% of the families who claim the Mortgage Interest Deduction have household incomes between $60,000 and $200,000. (NAR®)
  • 63.1% of all homeowners claimed the Mortgage Interest Deduction in 2003. (Rosen Consulting Group October 2010)


What would be the impact of eliminating the Mortgage Interest Deduction? 

Housing economists have studied the potential impact of the Mortgage Interest Deduction on homeownership rates if eliminated. The consensus concluded that:

  • 2 million fewer home owners if MID is eliminated. (Rosen Consulting Group October 2010)
  • Homeowners in states like Maryland, California, Nevada, Hawaii, and Connecticut would be hit the hardest. (Rosen Consulting Group October 2010)
  • Eliminating the MID would cause a 15% drop in home values. (marketwatch.com)


Mortgage Interest Deduction and the American Dream

The federal government has historically played a crucial role in ensuring that the housing sector has sufficient capital to meet mortgage demands. The various insurance programs and the implicit guarantee of Government Sponsored Enterprises (GSE’s) obligations, acted as an interest subsidy that has made housing more affordable for all homebuyers. 

The recent recession has exposed some flaws within the housing market, but overreacting will hurt the housing market further and make the American dream of homeownership harder to attain.


Effect on Families