Allied Academies International Conference page SHOULD HOME MORTGAGE INTEREST AND by arnold2

VIEWS: 0 PAGES: 2

									Allied Academies International Conference                                                        page 9


         SHOULD HOME MORTGAGE INTEREST AND
          PROPERTY TAXES BE DEDUCTABLE FOR
               FEDERAL INCOME TAXES?
                         Denis Boudreaux, University of Louisiana
                                        dob0896@louisiana.edu
               John T. Lambert, Jr., University of Southern Mississippi
                                       johntlambert@yahoo.com

                                              ABSTRACT

        Significant changes in the tax code affecting home ownership have been proposed by
Congress in the past and will surface again. The home mortgage interest deduction (HMID) and
the deductibility of property taxes were recommended to be eliminated or significantly modified by
President's Bush's 2005 Advisory Panel on Tax Reform. In the interest of clarifying this complex
issue, this paper presents the economic benefits and costs to society for maintaining these
controversial home ownership tax incentives. A simulated model is shown for two families with
large home price and income level differences. It is found that both families gain economically from
the current tax code, however the higher utility and the higher relative economic return accrues to
the family with the lower income.
        The purpose of this research is to investigate the costs and benefits of current tax rules
regarding the home mortgage interest deduction and the home property tax exclusion. Past studies
have established a strong case that federal tax laws favor investment in owner-occupied housing
over investment in many other financial and real assets (Aaron, 1972). Under current tax law,
capital gains on owner-occupied housing can be deferred from federal income taxes if the sale
proceeds are reinvested in a replacement residence within a prescribed time period.




Proceedings of the Academy of Accounting and Financial Studies, Volume 12, Number 1   Jacksonville, 2007
page 10                                                        Allied Academies International Conference




Jacksonville, 2007   Proceedings of the Academy of Accounting and Financial Studies, Volume 12, Number 1

								
To top