Tax Inequality: The Reported Effect of Mortgage Interest Tax Deduction
A recent report from Trulia indicated that white males are benefitting more from the mortgage interest tax deduction. In contrast, women and minority groups are unable to gain the same benefits, according to a news report from Forbes.com.
This tax deduction allows homeowners to deduct the mortgage interest they pay on owned homes, be it primary or secondary homes. In the said report of Trulia, taxpayers were able to save a total of $80 billion in 2013 alone.
The main criticism for this deduction is it provides the most gain for higher earning taxpayers that are able to purchase second homes and able to itemize deductions. Compared to the total number of taxpayers, only 12 percent of taxpayers with less than $50,000 adjusted gross income itemized are able to avail while about 94 percent with $200,000 adjusted gross income are able to utilize the tax benefit.
Trulia contends that not only does the tax benefit wealthier taxpayers, it highlights the inequalities between white parties and minority groups as well as between men and women.
According to Trulia analyst Felipe Chacon, the study's compiler, indicated that the mortgage interest deduction is very much like a 'cash infusion', as reported by MarketWatch.
In the said interview, Chacon said that individuals that already made down payments and have paid mortgages would be able to avail of the deduction. This is not so for renters, whose access to funds for a downpayment may be too far out of reach.
Chacon added, "As it stands now, it seems like a wedge is being driven between people who have a house and those who don't."
Furthermore, Chacon recommended that the said deduction be converted into a 'housing tax credit' benefitting both mortgage holders and renters. He added, "That could be substantial for people in lower-income groups. That could be a downpayment. That could help people get a house."