You Probably Can’t Get the Mortgage Interest Tax Deduction, So Why Should Anyone Else?

Photo by Evan Dvorkin on Unsplash

One of the changes in the 2017 tax bill was to double the standard deduction from $6,700 per person to $12,000. This had the effect of changing the number of people who itemize their tax returns from nearly a third of all taxpayers to less than 10 percent. This means that nearly 20 percent of taxpayers no longer have the advantage of using the mortgage interest deduction and getting a tax deduction for the interest they pay on their home mortgage. To be fair, the 10 percent of taxpayers who are still itemizing are almost all taking advantage this tax deduction, but why should they be getting this tax advantage? The 10 percent who still use it are mostly wealthy people who would be able to afford the house anyway and the tax deduction surely played no part in deciding if they were going to buy a house. So why didn’t Congress just eliminate this deduction in 2017? They feared the housing lobby.

You have to purchase a fairly expensive home to qualify for the mortgage interest deduction. If you and a spouse purchase a $500,000 home and get a loan with 4 percent interest, you’ll be paying $20,000 in yearly interest. Assuming that is your only itemized deduction, this is still not enough to get above the $24,000 standard deduction for a couple filing jointly. This is why the majority of people who are…