The federal tax code allows homeowners to write off mortgage interest payments from their income before calculating their tax bill. Although it’s old news for tax- and housing-policy wonks that homeowners are getting federal subsidy payments, it may surprise others who assume that the federal government’s housing assistance goes mostly to low-income renters.
The mortgage interest deduction adds up to a lot of money – an estimated $131 billion in 2012. That dwarfs total spending by the Department of Housing and Urban Development (under $50 billion). The biggest tax benefits go to high-income homeowners who’ve taken out big mortgages for expensive homes. Recent
results from the Urban Brookings Tax Policy Model show that means affluent white families living in the suburbs, not the low- or moderate-income people who are struggling to buy homes or make ends meet or the central city neighborhoods that need reinvestment.