Research Report Congress Should Phase Out the Mortgage Interest Deduction
Eric Toder
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The mortgage interest deduction is one of the most expensive federal tax preferences. Supporters claim it stimulates homeownership, which creates broad benefits to society beyond the benefits received by owners. But the case for these external benefits is unproven and the deduction is an ineffective way to promote homeownership. Instead, it provides an incentive for middle-income and upper income people to acquire larger and more expensive homes than they otherwise would. A uniform credit for interest or first home purchases would be a more effective subsidy for homeownership. The deduction, however, should be phased out gradually to minimize market disruption.
Research Areas Economic mobility and inequality Taxes and budgets Housing
Tags Fiscal policy Federal housing programs and policies Individual taxes
Policy Centers Urban-Brookings Tax Policy Center