The Mortgage Interest Deduction continues to be the subject of ongoing attention at the state and federal levels, with a focus on limiting or possibly eliminating the deduction altogether.

The deduction allows taxpayers who are home owners to reduce their taxable income by the amount of interest paid on the loan secured by their principal residence or, sometimes, a second home.

Government officials are understandably looking for any and every way to shore up state and national balance sheets. The economy moving at a snail’s pace and red ink spilling to the right and left is getting old.

But if our housing market stays in its current condition, chances of that broader economic recovery are limited. Everything is related to each other, and we need to encourage rather than discourage home ownership.

It’s a misconception that only the wealthy benefit from the MID, said the National Association of Realtors’ chief economist Lawrence Yun in a recent forum on the subject. In fact, it benefits primarily middle and lower income families.

Almost two-thirds of those who claim the MID are middle-income earners, and 91 percent of people who claim the MID earn less than $200,000 per year.

Lets not forget, reducing or eliminating the MID is a tax increase on homeowners, who already pay 80 to 90 percent of U.S. federal income tax, said Yun, adding the share could rise to 95 percent if the MID is eliminated.

One thing that is indisputable is that eliminating the MID will lower the homeownership rate in the U.S. While we must ensure that the conditions that led to the artificially inflated home ownership rate of the bubble years do not resurface, we also need to create the conditions for sustainable home ownership, which has been shown to provide myriad social benefits for families and communities.



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