Among Top Ten Housing Tax Expenditures Only 2% Goes to LIHTC

Published by Michael Novogradac on Tuesday, March 20, 2012 - 12:00am

According to fiscal year 2009 data included in the Analytical Perspectives document that accompanied the proposed FY 2011 Budget of the United States Government, the low-income housing tax credit is the eighth largest housing-related tax expenditure in the tax code.

However, that rank is misleading when one considers the low-income housing tax credit’s size relative to other housing-related tax expenditures.  Of the 10 largest housing expenditures, by dollar cost, the LIHTC is only 2%.  Here are the top 10: 

Housing Related Tax Expenditures

FY 2009 ($ millions)

Deductibility of mortgage interest on owner-occupied homes

$79,400

Deductibility of State and local property tax on owner-occupied homes

$29,010

Exclusion of net imputed rental income

$27,040

Capital gains exclusion on home sales

$23,500

Credit for homebuyer

$9,730

Exception from passive loss rules for $25,000 of rental loss

$6,020

Accelerated depreciation on rental housing (normal tax method)

$3,860

Credit for low-income housing investments

$3,800

Exclusion of interest on owner-occupied mortgage subsidy bonds

$960

Exclusion of interest on rental housing bonds

$810

  

The five largest housing-related tax expenditures all support homeownership and combined represent 91 percent of all housing-related tax expenditures in FY 2009.

Compared to these five expenditures, the low-income housing tax credit is significantly smaller.

Top Five Housing Tax Expenditures

Size Relative to the LIHTC

Deductibility of mortgage interest on owner-occupied homes

21 times larger

Deductibility of State and local property tax on owner-occupied homes

7 ½ times larger

Exclusion of net imputed rental income

7 times larger

Capital gains exclusion on home sales

6 times larger

Credit for homebuyer

2 ½ times larger

Total of Top Five Housing Tax Expenditures           

44 ½ times larger