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The Variation of Homeowner Tax Preferences by Income, Age and Leverage

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  • David C. Ling
  • Gary A. McGill

Abstract

It is well known that owner‐occupied housing has long received favorable tax treatment in the U.S. federal income tax system relative to a system in which all income, regardless of its source, is subject to taxation. As a result, many economists have argued that the United States overinvests in owner‐occupied housing relative to the investment that would result from a neutral income tax system. In addition, the distribution of the subsidy is often viewed as inequitable because high‐income households receive the largest subsidy per dollar of housing. This article uses the 2005 American Housing Survey, conducted by the U.S. Department of Commerce, to perform a microlevel analysis of the current magnitude and distribution of homeowner tax preferences. We then assess how the magnitude and distribution of tax preferences would be altered by replacement of the mortgage interest deduction with a 15% credit.

Suggested Citation

  • David C. Ling & Gary A. McGill, 2007. "The Variation of Homeowner Tax Preferences by Income, Age and Leverage," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(4), pages 505-539, December.
    • Handle: RePEc:bla:reesec:v:35:y:2007:i:4:p:505-539
    DOI: 10.1111/j.1540-6229.2007.00199.x
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    References listed on IDEAS

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    1. Edward L. Glaeser & Jesse M. Shapiro, 2003. "The Benefits of the Home Mortgage Interest Deduction," NBER Chapters, in: Tax Policy and the Economy, Volume 17, pages 37-82, National Bureau of Economic Research, Inc.
    2. Rosen, Harvey S., 1979. "Housing decisions and the U.S. income tax : An econometric analysis," Journal of Public Economics, Elsevier, vol. 11(1), pages 1-23, February.
    3. Edward L. Glaeser & Jessse M. Shapiro, 2002. "The Benefits of the Home Mortgage Interest Deduction," Harvard Institute of Economic Research Working Papers 1979, Harvard - Institute of Economic Research.
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    Cited by:

    1. Poterba, James M. & Sinai, Todd, 2011. "Revenue Costs and Incentive Effects of the Mortgage Interest Deduction for Owner-Occupied Housing," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(2), pages 531-564, June.
    2. Brent W. Ambrose & Patric H. Hendershott & David C. Ling & Gary A. McGill, 2022. "Homeownership and taxes: How the TCJA altered the tax code's treatment of housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(5), pages 1167-1200, September.

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