Home mortgage interest deduction

A home mortgage interest deduction is a form of housing subsidy that allows taxpayers who own their homes to reduce their taxable income by the amount of interest paid on the loan which is secured by their principal residence (or, sometimes, a second home). The mortgage deduction makes home purchases more attractive, but contributes to higher house prices.

Most economists believe mortgage interest deduction is bad policy and is counterproductive. They note that it increases inequality, is an unnecessary market distortion, and contributes to housing unaffordability.

Most developed countries do not allow a deduction for interest on personal loans, but the Netherlands, Switzerland, the United States, Belgium, Denmark, and Ireland allow some form of the deduction.

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