Recent research from the Housing Assistance Council, Proposed Changes to the Mortgage Interest Deduction and What They Could Mean for Rural America, examines the size of mortgages and the impacts of mortgage interest deduction (MID) reform in rural counties. The report concludes that lowering the amount of a mortgage eligible for the MID to $500,000 would have little impact in rural areas. Only 8.5% of 2015 U.S. tax returns claiming the MID were from rural counties, and fewer than 2% of new mortgages in rural counties in 2016 were over $500,000.
The MID allows homeowners to deduct the interest paid on their mortgage from their taxable income. Of the 149 million U.S. tax returns filed for 2015, 22% claimed the MID. Of the tax filers claiming the deduction, 91.5% of them lived in metropolitan (urban/suburban) counties, while 8.5% resided in rural counties. This difference is due to fewer homeowners, fewer homeowners with a mortgage, and lower incomes and home values in rural counties.
The NLIHC-led United for Homes campaign proposes lowering the amount of a mortgage eligible for mortgage tax relief from $1 million to $500,000, converting the MID to a credit (which would benefit 25 million lower income homeowners), and reinvesting the savings from those two changes into affordable housing solutions for households with the lowest incomes. The House tax reform bill would lower the amount of mortgage eligible for the MID to $500,000, but it would not convert the deduction to a credit or reinvest the savings into affordable housing. Lowering the mortgage cap to $500,000 would affect fewer than 2% of mortgage holders in rural counties and 7.4% of mortgage holders in metropolitan counties. Ninety percent of rural counties each had fewer than 10 new mortgages over $500,000.
Proposed Changes to the Mortgage Interest Deduction and What They Could Mean for Rural America is available at: http://bit.ly/2iMDVZg