Congress Gunning for Home Tax Deduction Favored in Montgomery County

A report by Pew Charitable Trusts found some areas in the Washington, DC suburbs benefit more from a controversial tax credit than any other place.

A home ownership tax credit favored by the wealthy disproportionately benefits residents of Maryland and Montgomery County, particularly Bethesda, Gaithersburg and Frederick, a report from Pew Charitable Trusts found.

Some members of Congress, however, are working to cut the mortgage interest deduction from the tax code.

In Maryland, 37 percent of tax filers claim the deduction, while more than 40 percent of tax filers in Bethesda, Gaithersburg and Frederick claim the mortgage interest deduction, the largest percentage in the country, Bloomberg BusinessWeek reported. Nationally, only 22 percent of filers claim the deduction, Bloomberg reported. The deduction is typically filed in wealthy areas with high rates of home ownership. 

In the 20902 zip code, 33.2 percent of tax filers take advantage of the mortgage interest deduction, according to data from Pew. 

Rep. Dave Camp (R-MI), chairman of the House Ways and Means Committee, is looking to simplify the nation's tax code and eliminate breaks, Bloomberg reported last week. Camp is pushing for his committee to approve a bill that may eliminate this deduction this year. 

Pew's report highlighted the effects on some local economies if the tax deduction were eliminated:

Policy makers should be aware of the geographic implications of changes in federal tax policy as debates over federal deficit reduction and tax reform move forward.  

Tax filers in certain states, or areas within a state, would pay higher, or lower, federal income taxes than under current policy.This could affect economic activity both across and within states, and indirectly affect state and local revenues. The actual impact on any given area would depend on how any changes were structured.

(See a map from Pew)

Corbetto May 07, 2013 at 12:42 PM
As with all things in the House these days, they will attempt to work with a machete when a scalpel in needed. The mortgage interest deduction does favor the wealthy... because it is applied like a flat tax would be - it is a single rate that doesn't care if your mortgage interest is $10k or $1 million for the year. Obviously such a plan would favor the wealthy. The mortgage interest deduction is intended to encourage people to become homeowners. But beyond that, for middle-class families like mine, it is invaluable to our outlook for the year. Year after year, we pump the refund from the mortgage interest deduction back into the local economy by using that money to complete home improvement projects. From a new patio deck this year to the retaining wall to better manage water drainage from a neighbor's yard last year, that refund is used to not only support local businesses but has the added benefit of improving property values. What's needed is to have the mortgage interest deduction places on a scale tied to inflation. Surely if the original intent of the deduction was to encourage homebuying, those with multi-million dollars mortgages lack the need for such an incentive. Cutting the deduction across the board would have a serious, lasting impact on middle-class homeowners (and future homeowners).
Will N. May 07, 2013 at 01:29 PM
calling the mortgage interest deduction "controversial" as you do in your subheading is comical.
Corbetto May 07, 2013 at 01:48 PM
I would agree. I'd also note, and not to beat up on the reporter for this story, but the subheading also calls it a tax credit. It's a deduction; not a credit. They are two very different beasts.
Patrick May 08, 2013 at 12:03 PM
This credit doesn't favor the wealthy, they would not miss the deduction. It is to encourage middle class home ownership and does an excellent job at that. I would not own my home if it were not for this deduction and a wonderful VA Loan. The cost of owning a home vs renting would not be worth the headache with out this vital deduction.


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