The mortgage interest tax deduction isn't available to every taxpayer, but that doesn't stop it from getting a whole lot of attention.
But as I've noted over the years, everyone's tax situation is different. That means that a tax deduction often is worth more to some folks than others. And when it comes to the mortgage interest write-off, that difference in tax worth depends a great deal on geography.
The nonpartisan tax research group The Tax Foundation did some state-by-state basis numbers crunching using recently released IRS data from 2008 found that Maryland and California homeowners get the most from the mortgage deduction.
My old stomping ground of Maryland had the highest percentage of tax returns claiming the mortgage interest deduction, 37.9 percent. When only those tax returns were counted, the average Maryland tax return claimed $14,162 in mortgage interest, the fifth highest nationwide.
California had a lower percentage of tax returns claiming the deduction, but when Californians do deduct mortgage interest, they deduct a lot. Golden State filers ranked highest in average claim amount on returns with mortgage interest with $18,876.
At the other end of the scale are North Dakota and South Dakota in the overall deductions ranking, and Oklahoma and Iowa among only those returns on which mortgage interest was deducted.
Obviously, it doesn't take a rocket scientist (or tax geek) to realize that in states where residents have higher income, those folks are more likely to be able to take out larger mortgages for expensive homes. Plus, homes there tend to cost more than in states with lower average incomes.
This disparity in the amount deducted in various parts of the United States seems to make the question raised by Howard Gleckman of the Tax Policy Center even more relevant. Gleckman wonders whether we should dump the home mortgage interest deduction.
The deduction is popular from a tax perspective, says Gleckman, because it's believed that the tax break increases home ownership and motivates homeowners to be more engaged in their communities than renters.
Neither is necessarily true, says Gleckman.
What is certain, according to Gleckman, is that the mortgage interest deduction is not a very efficient way to encourage home ownership.
"Most benefits go to high-income households that would probably buy a house with or without the deduction," says Gleckman. "Since nonitemizers get no benefit from the deduction, it is not surprising that most of the subsidy goes to upper-bracket taxpayers."
Is Gleckman right? Did the availability of the mortgage interest deduction make a difference in your decision to buy a house? Did you take out a bigger loan because you would get more of a deduction? Does the deduction help substantially reduce your tax liability each year?