Tax Incentives and Housing Decisions: Effects of the Tax Cut and Jobs Act
41 Pages Posted: 23 Feb 2021 Last revised: 9 Oct 2021
Date Written: October 8, 2021
The Tax Cut and Jobs Act (TCJA) altered the US tax code, greatly reducing itemization rates and effective homeownership subsidies. Using American Community Survey data combined with the NBER TAXSIM program, we estimate the TCJA caused the average effective homeownership subsidy value to decline 62%, from $2,154 to $801. Variation in state taxes and house price levels creates variation in exposure to the TCJA effective homeownership subsidy shock. Utilizing this variation, we find that each percentage point decline in the effective homeownership subsidy lowered homeownership rates by 0.56 percentage points and mortgages by 0.69 percentage points.
Keywords: Homeownership, mortgage interest deduction, housing finance
JEL Classification: H2, R38, R31
Suggested Citation: Suggested Citation