The Mortgage Interest Deduction
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Transcript of The Mortgage Interest Deduction
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The Mortgage Interest Deduction
The Short Version of What Every REALTOR® Needs to Know about
Housing Tax Incentives Danielle Hale – May 16, 2013
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US Publicly Held Debt has exceeded 75% of GDP
20072008
20092010
20112012
20132014
20152016
20172018
20192020
20212022
20230
5000
10000
15000
20000
25000
30000
Publicly Held Debt New Debt (Deficit) GDP
Source: OMB, Haver
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MID since 1913
1913
2013
Other tax situations… Loopholes?
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How many people take the MID?
A. Roughly 35 to 40 million tax filersB. Roughly a quarter of all tax payersC. Roughly half of all home ownersD. Roughly three-quarters of home
owners with a mortgage
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35 to 40 Million Tax Filers Claim the Mortgage Interest Deduction each year
2007 2008 2009 2010 20110
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
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MID claimers are roughly ¼ of tax filers, ½ of home owners, and ¾ of mortgaged home owners
2007 2008 2009 2010 20110%
10%20%30%40%50%60%70%80%90%
32,000,000
34,000,000
36,000,000
38,000,000
40,000,000
42,000,000
44,000,000
27% 27% 26% 26% 24%
55%51% 49% 49% 48%
81%75% 73% 73% 72%
Number of MID Filers Share of All Tax FilersShare of Home Owners Share of Mortgaged Home Owners
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How many people take the MID as compared to other popular tax provisions?
A. CharitableB. Child Tax CreditC. Qualified DividendsD. Ordinary DividendsE. Real Estate Tax Deduction
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There are slightly more RE Tax than MID claims each year, and roughly the same number of charitable
claims depending on the year.
2007 2008 2009 2010 20110
5,000,00010,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,00050,000,000
05,000,00010,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,000
Number of MID Filers CharitableChild Tax Credit Qualified DividendsOrdinary Dividends Real Estate Tax Deduction
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The life-cycle hypothesis at work in housing:
• The life-cycle hypothesis suggests that consumers try to smooth consumption over their lifetime
• Nearly 90 percent of recent home buyers financed a home purchase– Nearly all recent home buyers under age 44
financed their home purchase while only roughly half of those 65 or older did so
– Typical first-time buyers financed 96 percent of their home purchase while repeat buyers financed 87 percent
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Financing with a fully amortizing fixed-rate mortgage has 2 key implications:
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 $-
$100 $200 $300 $400 $500 $600 $700 $800 $900
$1,000
Monthly Interest Monthly Principal
Constant Monthly Payments
Decreasing Interest Payments
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The typical MID beneficiary is:
• Under 45• Married• With Kids• Earning less than $200,000
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Home Ownership is Not A Loophole