Does homeownership pay during tax time?

Yesterday, Trulia released a study that highlights the gap in homeownership rates for women and minorities. According to the study, women and minorities who identify as the head of their household still aren’t borrowing to buy homes at the same rate of men and whites, even with the same income.

Since they aren’t able to secure loans, not only are they only locked out of becoming homeowners, they are locked out of receiving some of the benefits of owning a home  — namely the mortgage interest tax deduction (MITD). Trulia notes that in 2013, homeowner taxpayers received $80 billion as a result of MITD.

So what’s the issue?

The MITD tends to benefit higher income households, since those households are better able to afford homes and itemize deductions, the study said.

Twelve percent of tax filers with an adjusted gross income of $50,000 itemized their deductions compared to 94 percent of tax filers with an AGI of $200,000 or more. Since women and minorities are more likely to be on the lower end of the pay scale, they cannot reap the benefits of the MITD.

In fact, white heads of households are more than three times as likely to be eligible to claim MITD, and men are 31 percent more likely to be eligible to claim MITD.

Furthermore, Trulia added that even when class is taken out of the equation, minorities of all kinds and women are far behind in homeownership rates due to the lack of generational wealth.

Some of their key findings included:

• After controlling for age and income, blacks are still 56.9 percent less likely to own a home with a mortgage than whites. Blacks generally compared more favorably in Florida, California, and Texas and less so in Northeast and Midwest.
• In the San Francisco Bay Area cities, Chinese Americans are twice as likely to have a mortgage as whites, but 38.9 percent less likely to have a mortgage nationally.
• Hispanics are 50.9 percent less likely than whites to have a mortgage, but are more likely to own with a mortgage at the same rate or better in the Southwest and West. Hispanics in El Paso, Texas, are more than twice as likely to have a mortgage as whites and make up more than 75 percent of all households.
• Single women are 6.2 percent less likely to own a home with a mortgage than single men, but had mortgages at a greater rate than men in San Antonio, Raleigh, North Carolina, Seattle, Denver and Tacoma, Washington, to name a few.

While Trulia has placed a large spotlight on race, gender and access to the MITD, others feel the benefits of homeowner tax deductions, including the MITD, are nearly null for all — no matter their class, race or gender.

John Burns Real Estate Consulting released its own study on homeowner tax deductions and found found that homeowner tax deductions haven’t done much for homeowners since 2008.

“For decades, homeowners benefitted from both the financial and psychological benefits of paying less taxes,” John Burns said. “Homeownership came with income tax savings because mortgage interest plus property taxes easily exceeded the standard deduction allowed by the IRS.”

Burns points out that falling interest rates and home prices have reduced mortgage interests, and furthermore, the standard marital deduction has risen from $1,300 in 1972 to $12,600 today, meaning that the first $12,600 of itemized deductions has no benefit to consumers.

According to Burns’ study, a typical first-time homebuyer financing 95 percent or less of a median-priced U.S. home pays less than $12,000 in mortgage interest and property taxes, which is not enough to warrant itemizing. Even with other deductions that bring the taxpayer over the $12,600 limit, the tax savings are minimal.

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