Mortgage tax break safe this election cycle

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Fifteen Republicans are fighting for their party’s nomination for president in 2016. The Democratic seekers of the White House so far number five.

All 20 of these possible presidential candidates have divergent policy positions, even within their own parties. But one area that all generally agree on is that the tax code is too complex.

Another tax issue that also seems consistent across most major candidates is that a tax break for homeowners is safe. Even this election cycle’s biggest booster of the so-called flat tax, Sen. Rand Paul, R-Ky., says in his proposal that he would continue tax deductions for charitable donations and mortgage interest.

Voting homeowners

The numbers make it clear why homeowners get such attention. Although Commerce Department data show that homeownership for the first quarter of this year was at its lowest level in 20 years, most of us still own the places where we live. Almost 64% of Americans own their homes.

So while weakened, the American dream of a yard for the kiddies and a mortgage that offers a tax break persists. And from a political standpoint, it’s a tax break that is primarily enjoyed by the voters who, despite candidates’ stump speeches, get the most attention from White House wannabes.

Those favored voters are the wealthier Americans who tend to be a reliable voting bloc. More importantly, at least during the run-up to election day, they tend to contribute to candidates.

And it’s these wealthier homeowners who benefit most from the itemized deduction for mortgage interest. No pragmatic candidate would suggest doing away with a favored tax benefit for these voters.

A billion-dollar tax break for the wealthier

The Joint Committee on Taxation estimates that overall, the itemized deduction for mortgage interest on owner-occupied homes will cost more than $405 billion for tax years 2014 through 2018.

Digging a little deeper, the numbers show that the homeowners getting the benefit of writing off interest on their residential mortgages are mainly folks earning more than $100,000.

Who benefits from the mortgage interest deduction?

Income Mortgage deductions claimed
≤ $100,000 $12.4 billion
$100,000-$200,000 $27.4 billion
$200,000+ $29.3 billion

Source: Joint Committee on Taxation

The nonpartisan congressional numbers-crunching committee says that taxpayers who make between $100,000 and $200,000 filed mortgage interest claims for 2014 that totaled $27.4 billion.

Taxpayers who report incomes of $200,000 or more get even more from this tax break. The Joint Committee on Taxation says this income segment claimed $29.3 billion of their home loan interest in 2014.

The combined mortgage interest claims of every other homeowner making less than $100,000 came to just more than $12 billion last tax year.

Those kinds of numbers add up to one result. The mortgage interest write-off, despite its cost to the U.S. Treasury, is here to stay.

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