Yun: Mortgage interest deduction must be saved

Lawrence Yun

Lawrence Yun


Join the conversation. Vote on the mortgage interest deduction at the bottom of this guest column.

By Lawrence Yun

Special to InsideRealEstateNews

Throughout U.S. history, homeownership has been encouraged because it strengthens communities, supports the economy, and helps families build wealth —  for many people, owning a home means gaining a foothold into the middle class

Removing favorable tax treatments for homeownership, like the mortgage interest deduction, would prevent many Americans from building the kind of financial security that owning a home can provide.

The mortgage interest deduction helps many families become home owners by reducing the carrying costs of owning a home.

The ability to deduct the interest paid on a mortgage can mean significant savings at tax time.

For example, a family who bought a home last year with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 5 percent, could save nearly $3,500 in federal taxes when they file next year. That’s real money they can use to pay down other debts, save for their children’s college education, or put away for retirement.

Unlike the very rich— much of whose wealth is tied to the stock market — the wealth of most middle-class American families is connected to their home. Millions of these Americans bought their homes with the understanding that mortgage interest is tax-deductible, and many of them have steadily paid down their mortgages to build equity in their home.

The nation’s homeowners already pay 80 to 90 percent of U.S. federal income taxes.

Raising taxes on them now will destroy the hard-earned equity and wealth accumulation of all home owners, independent of their tax filing status, and crush the dreams they’ve worked hard to achieve, such as college, retirement or starting a small business. In a time when the middle class faces increased economic pressures, hard-working, home-owning families must continue to receive this important tax benefit.

America’s housing markets are on the mend.

If the mortgage interest deduction was reduced or eliminated, the value of the nation’s property owner’s hard earned wealth would decline because of lower demand.

The level of wealth destruction would depend on the degree that the mortgage interest deduction was trimmed. Home sales also help generate more than 2.5 million private-sector jobs in an average year.

Since housing is a key driver in our national economy, accounting for more than 15 percent of the U.S. Gross Domestic Product, this would ultimately hinder a housing market that is still recovering, put jobs at risk, and place the broader economy under stress. As the housing market and economy continue to stabilize, Congress should focus on doing no harm to housing and America’s 75 million homeowners.

The mortgage interest deduction is essential to homeownership, which is the foundation for a healthy middle class, and vital to the stability of the housing market and economy.

 Lawrence Yun is the Chief Economist for the National Association of Realtors.

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Editor’s Note: This is the first of a regular series of point-counterpoint debates on The opposing view is taken by economists Anthony Randazzo and Dean Stansel. To read that guest column, please visit

Have a story idea,  real estate tip, or a point-counterpoint debate topic?  Contact John Rebchook at is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.

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John Rebchook

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for, covering commercial real estate for the Internet publication.

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  1. “For example, a family who bought a home last year with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 5 percent, could save nearly $3,500 in federal taxes when they file next year.”

    Larry, I don’t know if I would call this a major distortion of facts or just an outright lie. Here is the math…..

    Homebuyer using MID.
    $200,000 loan amount at 5% = $10,000 in yearly interest(also will go down every year for the life of the loan)
    Property tax=$2,000
    State and local taxes=$1,000

    Total deductions $13,000

    Income $70,0000
    Marginal tax rate 25%
    Taxable income 57,000
    Taxes owed $14,250

    Senecio 2 Renter

    Income $70,000
    Marginal tax rate 25%
    Standard deduction $11,900
    Taxable income $58,100
    Taxes paid -$14,525

    Difference between itemizing and standard deduction -$275 per year

    I think I will go with outright lie.

    How about a poll….

    A. Larry is telling the complete truth
    B. Larry is distorting the facts
    C. Outright lie

    • As i have said many times before. Buying a personal residence is a very mediocre investment. The larger the purchase, the worse the return, and somewhere in the $2 million range it becomes a loser when factoring in maintenance, taxes, hoas, and utilities. So, why not buy a 4-plex, live in one unit, and rent the rest? You will always be able to deduct the interest on rentals, and the tenants pay for your mortgage payment! Sounds like a much better deal than trying to write off $1 million on a losing investment.

    • Well, from John’s poll above, it looks like 80% if the respondents don’t understand how our tax system works. Keep telling your clients they will receive a $3,500+ tax incentive for using a MID. I’m sure they will not appreciate it when their CPA tells them they have no incentive to itemize, therefore, no benifit.

      • The the vast majority of the people who are benefiting from the MID are people living in manhattan and westchester county, NY with $30,000 in property taxes and very high state and local taxes. The rest of us are subsidizing them. We should eliminate the deductions and lower the marginal rates.

        • Actually, disregard everything I just said. I just got my 2012 property tax assesment and my home in observatory park and my taxes are now over $7,700 per year. I will be glad to take the subsidy from everyone else.

  2. As we have found out in the financial crisis of 2008, if you continue to give tax benefits to homeowners and investors when asset prices are increasing more than 2 to 3 percent a year the economy becomes very unbalance and very unstable. When to much credit is being created in the private sector, before the Fed causes interest rates to rise, we should use the income tax to correctly slow down the economy. Higher interest rates is not the correct policy to decrease creation of debt (money) because it slowes down the normal production and consumption economy. What you want to do is get rid of the wild speculation in the economy. The extra demand is not coming from the bottom of the economic ladder, it is coming from the top of the economic ladder as people with money want to protect there money from taxes and inflation enter the market to profit from inflation and capture lower long term capital gains tax. We can better control economic bubbles, like the primary home bubble, by enacting the Zero Appreciation (Inflation) Tax Policy. For more info go to

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