The mortgage interest deduction has become a political hot potato this election season, but perhaps under a number of wrong assumptions. As the New York Times reports, the deductions actually benefits few middle-class Americans.
While Romney has said he would limit itemized deductions, what many critics have missed is that only 30 percent of Americans even itemize their taxes, the Times said. Beyond that, however, those that benefit most from the mortgage interest deduction are upper and upper-middle class earners — people making between $100,000 and $500,000 a year.
Not only does the deduction grow in higher tax brackets, but the deduction can be used towards second homes, favoring higher-earners more likely to own multiple dwellings.
In fact, the value of the deduction for households making between $40,000 and $50,000 per year is a mere 0.3 percent of their post-tax income, the Times noted, using data provided by the Urban-Brookings Tax Policy Center.
And, yet, “the deduction has been politically sacrosanct for so long,” the Times said, reflecting “just how much it is prized by the itemizers of the moment, as well as those who are in the business of selling homes.” [NYT] –Guelda Voien