Who Claims the Mortgage-Interest Tax Deduction?

Neil Shah for the Wall St. Journal writes: One lesson we learned from the housing-market collapse is if you encourage Americans to borrow — by making home-mortgage interest tax deductible — people will borrow more, maybe too much for their own good. But who exactly tends to take advantage of this tax benefit?

In a report released Tuesday, the Pew Charitable Trusts finds the popularity of the tax deduction for mortgage interest — one of the biggest so-called tax expenditures in the U.S. tax code — varies greatly both across and within states. In a nutshell, it’s much more popular in areas with relatively high incomes and property values, especially along the East Coast and in parts of the West. Areas in the South, by contrast, tended to abstain. Beneficiaries also tended to cluster around major metro areas rather than less-populous areas.

Look at the map below. Roughly 25% of U.S. tax filers claimed the mortgage interest deduction in tax year 2010. But that masks considerable variation: In Maryland and Connecticut, for example, around 35% of tax filers claimed this benefit, while in Mississippi and Louisiana, only about 17% did. (The Internal Revenue Service has now released state data for 2011, but Pew says the geographical distribution of claim-rates remains largely the same.)