Owning a home is a major part of the ‘American Dream’ and serves as a symbol of both financial success and independence. To incentivize homeownership, the US tax code includes deductions and credits to help reduce the after-tax costs of paying for a mortgage and other related costs. That’s a fantastic benefit, and an opportunity to build generational wealth, but for an increasing number of Americans homeownership is feeling increasingly unattainable.
According to a recent study conducted by Intuit Credit Karma, 47% of Americans feel pessimistic about their finances and nearly half of Americans believe they will never be able to buy a home. This pessimism is due to a number of factors, including low housing inventory, rising rent costs, high mortgage rates, inflation, home prices, and the general cost of living.
In addition, because of persistent income inequality and historical disparities in the lending and housing market, Black and Hispanic Americans have not enjoyed the same benefit of homeowners deductions as White homeowners. In a recent paper from the Urban-Brookings Tax Policy Center titled, “Racial and Ethnic Disparities in the Home Mortgage Interest Deduction,” researchers found that White families are more likely to own a home compared to Black and Hispanic families and more likely to “have sufficient deductible expenses to make it worthwhile to itemize rather than claim the much simpler standard deduction.”
For those who did claim the Mortgage Interest Deduction (MID), “Black and Hispanic families received just 54 percent and 38 percent, respectively, of the average [MID benefit] for all families in 2019. In contrast, White families got 21 percent more than the average.” The paper outlines a number of possible reasons for this disparity based on a history of discrimination leading to lower homeownership rates, higher loan-to-value ratios for Black and Hispanic families, and limited opportunities for families of color to pass accumulated assets to their descendants.
So where do we go from here? At Intuit, we continue to advocate for a simple and fair tax code. We’re big believers that tax complexity impedes small businesses, the self-employed, individuals, and especially lower-income workers from maximizing their well-earned tax refund. Tax credits used to incentivize specific behaviors don’t work if people don’t understand them or know how to maximize them. But what if those dreams or goals are falling out of reach? We believe more needs to be done to benefit renters and help make homeownership more attainable for everyone.
In his State of the Union, President Joe Biden announced a plan to help lower housing costs by providing tax credits for first-time homebuyers and people who sell their starter homes, while also further tackling the inventory and scarcity of affordable housing. Improving and simplifying homeownership tax benefits, while tackling housing supply could make a real difference. As a company, we applaud efforts to expand homeownership—and the simplification of tax benefits around home ownership—for more Americans of every race and ethnicity.