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The Tax Treatment of Mortgage Investment
Author(s) -
Tuccillo John A.
Publication year - 1983
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00292
Subject(s) - tax credit , economics , debt , investment (military) , tax deduction , monetary economics , shared appreciation mortgage , finance , mortgage insurance , tax reform , financial system , state income tax , public economics , law , gross income , casualty insurance , politics , political science , insurance policy
This paper examines the theoretical and empirical justifications for replacing the special bad‐debt reserve deduction currently accorded to thrifts under federal tax law with a mortgage interest tax credit. It presents the background to the recommendations of the President's Commission on Housing that such a change be employed as a short‐term tax incentive to mortgage investment and compares a system in which all mortgage investors received the bad‐debt deduction with one in which all receive a tax credit. The conclusion is that the credit is superior to the deduction on theoretical grounds although it is difficult to predict with certainty the impacts of such a change in tax policy on total mortgage investment.