Updated May 28 at 2:28pm

The stakes related to mortgage deductions

Limiting the homeowner mortgage-interest deduction came up in two of the presidential debates, but specifics about who would be affected and how much they might lose in tax benefits were minimal. To put some rough numbers on the issue, here’s a quick primer on the mortgage-interest deduction and related housing write-offs. More

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Focus: REAL ESTATE

The stakes related to mortgage deductions

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Limiting the homeowner mortgage-interest deduction came up in two of the presidential debates, but specifics about who would be affected and how much they might lose in tax benefits were minimal. To put some rough numbers on the issue, here’s a quick primer on the mortgage-interest deduction and related housing write-offs.

How big are they? Very big – which is why they have become such a tempting revenue-raising target for candidates seeking to reduce the massive federal deficit. According to estimates from the congressional Joint Committee on Taxation, the mortgage-interest deduction alone will “cost” the federal government $484.1 billion between fiscal 2010 and 2014 – $98.5 billion in 2013 and $106.8 billion in 2014. Write-offs by homeowners of local and state property taxes account for another $120.9 billion during the same five-year period.

Keep in mind: What “costs” the federal government also represents significant tax savings for the people who take the deductions, in this case the millions of homeowners who save thousands of dollars a year that they are not paying to the IRS. In fact, according to a new analysis by Jed Kolko, chief economist for the real estate information site Trulia.com, among those taxpayers who itemize on their federal returns, 49 percent of total write-offs are housing-related – primarily mortgage interest and local property taxes. For homeowners as a group, this is a big deal.

But since only about one-third of all taxpayers itemize on their returns – the rest opt for the standard deductions – who’s really getting these tax savings? As you might guess, people who have higher incomes are more likely to itemize and claim mortgage interest and other housing deductions. Citing the latest data on the subject, published by the IRS in 2009, Kolko found that while just 15 percent of households with incomes below $50,000 took itemized deductions, 65 percent of those with incomes between $50,000 and $200,000 did. Just about everybody with income above $200,000 – 96 percent – itemized on their returns.

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