The purpose of the federal mortgage tax deduction is to allow homeowners to use what is usually their largest asset -- their home -- as a nestegg for their old age.According to the NAR:
The tax system supports homeownership by making it more affordable. While it is true that only about one-third of taxpayers itemize deductions, it is also true that, over time, more than one third of taxpayers receive the benefit.Of course the NAR will argue for the deduction as a tool to make housing affordable. However, the reality of the mortgage interest tax deduction is different.
Dallas physician Steven Davidoff doesn't fit the stereotype of someone who needs a housing subsidy: raised in Plano, educated at Tulane University Medical School, working as a pulmonary critical care physician.The mortgage interest tax deduction is welfare for the wealthy and it does nothing to make housing affordable to the middle class. It just distorts the market. We all agree that the nation's deficit hole needs to be plugged up, and that $103 billion would make a good-sized plug.
But Davidoff, 35, is like tens of millions of other Americans who benefit from tax policies that reduce the cost of buying a home. Most of them are like him – affluent enough to buy a home without help, but happy to use a tax deduction for mortgage interest, even though it will cost the federal treasury about $103 billion in lost revenue this year.
"I honestly view it as a bonus, not something that I [considered] when we were looking at homes," said Davidoff, who works at Texas Health Presbyterian Hospital Plano. "The larger the home, the larger your deduction can be. That certainly is an added benefit."