Mortgage Interest Tax Deduction Limit on ‘Big’ Homes Opposed
NAHB has come out in strong opposition to a recent proposal by Rep. John Dingell (D-Mich.) to eliminate or curtail the mortgage interest deduction for a significant number of home owners based upon the size of their property.
Under the proposal, taxpayers owning homes larger than 3,000 square feet would lose at least a portion of their mortgage interest deduction, and those with residences larger than 4,200 square feet would lose the deduction entirely.
The plan is ostensibly intended to fight “sprawl” and encourage energy efficiency, but the revenue raised through limiting the mortgage interest deduction would be used to expand the Earned Income Tax Credit.
According to an analysis by NAHB, Dingell’s proposal would result in a massive tax increase of more than $13 billion annually for more than 6 million families, eroding the aggregate value of the mortgage interest deduction by more than 16%. All home owners would see downward pressure on home prices, which would be especially acute for the nearly 10 million households living in homes exceeding 3,000 square feet.
The proposal fails as an effective method of achieving the laudable goal of energy conservation, NAHB said, because new housing is far more energy-efficient than older homes and a tax-related mandate for home size would only serve to slow the replacement of the older, less-energy efficient housing stock.
New housing is also less “sprawling,” NAHB said, citing Census Bureau data showing a 10% decline in the average lot size of new homes from 1992 to 2006.
Based on NAHB research, there is no direct relationship between the energy consumed by a home and its size. The behavior of the occupants and their use of appliances is a better indicator of energy consumption.
NAHB supports increasing energy efficiency in home construction, specifically through incentives like the new home energy efficiency tax credit (Section 45L of the tax code), and it has led efforts to increase this tax incentive and make it permanent.
Further, the energy portion of the comprehensive national green building standard NAHB and the International Code Council have been readying for publication in early 2008 will reduce energy usage in new homes, thereby reducing carbon emissions.
To voice their concerns to Rep. Dingell over his tax proposal, NAHB members can click here.
For more information on this issue, e-mail Greg Brown at NAHB, or call him at 800-368-5242 x8421, or contact Elizabeth Odina, x8570.