The Short Version of What Every REALTOR® Needs to Know about Housing Tax Incentives Danielle Hale – May 16, 2013

1. The Mortgage Interest Deduction
The Short Version of What Every
REALTOR® Needs to Know about
Housing Tax Incentives
Danielle Hale – May 16, 2013

2. US Publicly Held Debt
has exceeded 75% of GDP
0
5000
10000
15000
20000
25000
30000
Publicly Held Debt New Debt (Deficit) GDP
Source: OMB, Haver

3. MID
since
1913
1913
2013
Other tax
situations…
Loopholes?

4. How many people take the MID?
A. Roughly 35 to 40 million tax filers
B. Roughly a quarter of all tax payers
C. Roughly half of all home owners
D. Roughly three-quarters of home owners with a
mortgage

5. 35 to 40 Million Tax Filers Claim the Mortgage
Interest Deduction each year
0
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
2007 2008 2009 2010 2011

6. MID claimers are roughly ¼ of tax filers, ½ of
home owners, and ¾ of mortgaged home owners
27% 27% 26% 26% 24%
55%
51% 49% 49% 48%
81%
75% 73% 73% 72%
32,000,000
34,000,000
36,000,000
38,000,000
40,000,000
42,000,000
44,000,000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2007 2008 2009 2010 2011
Number of MID Filers Share of All Tax Filers
Share of Home Owners Share of Mortgaged Home Owners

7. How many people take the MID as compared to
other popular tax provisions?
A. Charitable
B. Child Tax Credit
C. Qualified Dividends
D. Ordinary Dividends
E. Real Estate Tax Deduction

8. There are slightly more RE Tax than MID claims
each year, and roughly the same number of
charitable claims depending on the year.
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
2007 2008 2009 2010 2011
Number of MID Filers Charitable
Child Tax Credit Qualified Dividends
Ordinary Dividends Real Estate Tax Deduction

9. 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

10. Financing with a fully amortizing fixed-rate
mortgage has 2 key implications:
$-
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
Monthly Interest Monthly Principal
Constant
Monthly
Payments
Decreasing
Interest
Payments

11. The typical MID beneficiary is:
• Under 45
• Married
• With Kids
• Earning less than $200,000

12. Home Ownership is Not A Loophole