In an article published by Bloomberg, it has been reported that the cost of one of the most expensive individual tax breaks is shrinking.
I’m not talking about the tax-free health insurance contributions, which alone will cost the government $1 trillion, or exclusion of net imputed rental income, which sends the government a $50 billion bill every year.
Federal tax filers claimed around $71 billion less in mortgage interest deductions for 2009 than for 2007 (a 14 percent drop), and that trend continued into 2010 when the use of this tax deduction slipped 7.2 percent.
This can be attributed to a couple of things. The number of Americans who own homes keeps slipping south, and potential home buyers and those interested in refinancing have been enjoying mortgage rates near historic lows for a decent amount of time now. Plus, people are walking away and losing their homes and cannot take advantage of the mortgage interest deductions.
David Albouy, assistant professor of economics at the University of Michigan, explained, “as people were buying these giant houses, they were claiming a giant portion of their income in mortgage interest. Now they are losing that. They are now not billing the government indirectly for their risky investment in real estate.”
Head over to Bloomberg to check out the original article by clicking here.