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In a recent policy paper, The National Association of Home Builders (NAHB) highlighted an important change that affects every homeowner. Since the Tax Cuts and Jobs Act of 2017, only 9.6% of tax filers claimed the mortgage interest deduction (MID) in 2021, a significant drop from 30.9% in 2017. This shift occurred because more taxpayers now use the standard deduction instead of itemizing. |
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As fewer people benefit from the MID, its effectiveness in making homeownership more affordable for the middle class has diminished. The NAHB suggests updating the mortgage interest deduction to align with the current tax code and to better support prospective homeowners facing affordability challenges. They propose a mortgage interest credit as a more effective housing tax incentive. |
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Our take |
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Like the NAHB, we support converting the mortgage interest deduction into a targeted homeownership tax credit. This credit, applicable against mortgage interest and property taxes, would enhance tax code progressiveness and promote housing opportunities for lower and middle-class households. By benefiting all homeowners with mortgage interest and an income tax liability, this proposal should be seriously considered in the 2025 tax debate. |
Proposed updates to Mortgage Interest Deduction
