Portable Fiasco

It's tax season in the US.

My wife and I bought a house last year. Since the US tax code includes special rules and deductions for some housing-related expenses (interest payments in particular), we anticipated our taxes would be more complicated than they have been. So we bought a commercial software package to help us prepare our tax return.

To our surprise, our interest payments are so small (due to a small mortgage on a small house in a down market and ridiculously low interest rates) that they don't even reach the threshold required to take the tax deduction we expected. Our main reason for buying the software is moot.

It's a good problem to have, of course. We're far better off, financially speaking, with small mortgage payments and no tax deduction than we would be with a larger mortgage payment only fractionally offset by a tax deduction.

But it makes me wonder about the whole idea of the tax deduction for mortgage interest in the first place. Supposedly it's intended to encourage home-ownership. But obviously it only works in certain cases, like those involving bigger mortgages and higher interest rates. Do we as a nation really want to specifically encourage our citizens to own either homes that are expensive or which are poor investments (because of high interest rates)?

If we truly believed home-ownership to be an absolute good, wouldn't we encourage everyone, including less-affluent citizens, to own houses they can afford? Wouldn't that be the "all men are created equal" way of going about things?

But in practice it's legal to deduct mortgage interest on up to two houses. Because the only thing better for the country than home-ownership is double-home-ownership, I guess. In practice, the less one actually needs the perk of the mortgage interest deduction, the more valuable it becomes.