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Monday, July 18, 2011

The Mortgage Interest and Property Tax Deductions: Brief Overview with Revenue Estimates

Mark P. Keightley
Analyst in Public Finance

There has been increased concern over the size and sustainability of the United States’ recent deficits, the country’s long-run budget outlook, and most recently, the consequences of reaching the debt limit. This concern has brought the issues of the federal government’s revenue needs and fundamental reform of the tax system to the forefront of congressional debates. One place Congress may turn to address these issues is the set of tax benefits for homeowners, particularly the mortgage interest deduction and the property tax deduction for homeowners. The Joint Committee on Taxation (JCT) has estimated that the mortgage interest deduction costs the federal government $96.8 billion annually and the property tax deduction $24.2 billion annually.1 When these two deductions are combined they represent the largest tax expenditure, exceeding the exclusion for employer-provided health insurance.2

This report provides a brief overview of these two provisions, presents policy options with potential revenue effects, and briefly summarizes the economic effects of modifying the provisions. This report is a condensed version of CRS Report R41596, The Mortgage Interest and Property Tax Deductions: Analysis and Options, by Mark P. Keightley. Contained in that report is an in-depth summary of the mortgage interest and property tax deductions, distributional data, and reviews of the original intent of the provisions. Also included in that report is an analysis of the rationale for subsidizing homeownership, as well as an analysis of whether the mortgage interest and property tax deductions affect homeownership.

Date of Report: July 13, 2011
Number of Pages: 7
Order Number: R41918
Price: $19.95

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