Research Report Effects of Reforms of the Home Mortgage Interest Deduction by Income Group and by State
Chenxi Lu, Eric Toder
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This report considers three options for restructuring the home mortgage interest deduction – replacing the deduction with a 15 percent non-refundable interest credit, reducing the ceiling on debt eligible for an interest subsidy to $500,000, and combining the substitution of the credit for the deduction with the reduced limit on the interest subsidy. All three options would raise federal tax revenue and make the tax system more progressive. Distributional effects would differ by state of residence and, within states by income group. We display distributional effects by income group in California, Kentucky, Illinois, Michigan, New York, Oregon, Texas, Utah, and Wisconsin.

Research Areas Taxes and budgets
Tags Federal budget and economy