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What Mortgage Tax Laws Mean To You As a Homeowner

Homeowners receive considerable assistance from the federal government in the form of income tax benefits. These benefits are the result of general provisions in the tax laws that enable homeowners to deduct mortgage interest and property taxes from their taxable income, and that also reduce their capital gains tax liabilities. In fiscal year 1982 these tax benefits will amount to more than $39 billion. By way of comparison, in the same year the federal government will spend about $16 billion for the entire budget of the Department of Housing and Urban Development.

Over two-thirds of the recognized tax benefits to homeowners in fiscal year 1982--about $25.3 billion--will come from the deductibility of home mortgage interest payments. Another $10.7 billion will result from the deductibility of property tax payments for owner-occupied homes. Homeowners will receive an additional $1.2 billion in subsidies from the deferral of income tax on capital gains from selling their homes. About $650 million more in subsidies will result from excluding $125,000 in capital gains income from the sale of homes by persons aged 55 and older. Further tax benefits result from the use of tax-exempt bonds to finance private home mortgages, and, to a lesser extent, from the provision of excess bad debt deductions to financial institutions. In addition, many economists contend that homeowners benefit from the nontaxation of net imputed rental income--the difference between the income they could receive from renting their homes and the total costs of homeownership (mortgage interest, taxes, insurance, maintenance, and depreciation).

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