Does the Mortgage Interest Deduction Affect Homebuying?

Gary Cohn, chief economic advisor to President Donald Trump, recently sparked a debate over the role the popular mortgage interest deduction plays in the homebuying process.

"People don't buy homes because of the mortgage deduction,” Cohn said at the White House last week, according to CNBC.

Despite the tax break’s popularity, it is often not taken advantage of, giving some credit to Cohn’s claim. A taxpayer can only take the deduction if he or she itemizes. Just one-third of taxpayers itemize, while about 64 percent of Americans own a home. Three-quarters of those who itemize do take the deduction. The administration's proposed tax plan would raise standard deductions, causing even fewer taxpayers to itemize.

The new tax plan has received major push-back from the National Association of Realtors (NAR), one of the most powerful lobbying organizations in the U.S.

"This proposal recommends a backdoor elimination of the mortgage interest deduction for all but the top 5 percent who would still itemize their deductions," wrote NAR President William Brown in a release. "When combined with the elimination of the state and local tax deduction, these efforts represent a tax increase on millions of middle-class homeowners."

Read more