State Income Tax deductions for Mortgage Interest

On Tue, 18 Jul 2017, Hanson, Andrew wrote:
I’m looking for comprehensive state-year availability of mortgage interest deductibility going back to the early 1980s, through 2016. Specifically, I’d like to know if a given state in a given year allows a tax deduction for mortgage interest. I realize that pre-1986, this may not have been explicit, but I see that your website says that Taxsim has coded state level tax changes back to 1977 so I’m hoping you might be able to help.

TAXSIM certainly takes account of m ortgage deductions. Most states that allow the federal itemized personal deduction follow the same rules for mortgage interest deductions as the federal return, but where states do not allow any itemized deductions or treat mortgagess differently we do pick that up. TAXSIM is not table driven, so making definitive a list of states in each category would require examing all the code.

However, we can write a program to run though TAXSIM, gathering the tax liability for a sample taxpayer for each state and year. The taxpayer is a single person without children but with $10,000 of miscellaneous and $100,000 of wage income. Then we add $1,000 of mortgage interest to itemized personal deductions. If state income taxes go down by $5 or more, we can call that a state with a mortgage interest deduction. Will that do? Note that the federal mortgage deduction will increase the state tax for states that allow a deduction for federal tax paid.

Here is a link to the resulting ASCII file. The file format is intended for a statistical package, not publication. The 6 variables in the table are:

  1. Numeric State ID from SOI (1-51).
  2. Tax year (1977-2016).
  3. Mortgage deduction indicator (1 for deduction, 0 for none, -1 for no tax due).
  4. State postal abbreviation.
  5. Tax liability with no mortgage interest.
  6. Tax liability with $20,000 mortgage interest.

There are 2040 data lines (=51 states times 38 years) records in the file.

Last modified 17 July 2017 by drf