Untaxed imputed rental income subsidizes homeowners at $96 billion yearly cost.

Evidence

IRC §164. The 2017 Tax Cuts and Jobs Act limited the deduction of state and local income taxes and real property taxes to a maximum combined amount of 10,000. (The limit is the same for singles and married couples.) There is one other rather obscure tax subsidy for homeownership. Homeowners do not get taxed on the fair rental value of their homes, similar to when stay-at-home spouses provide tax-free services to their families. The technical tax term is “imputed income.” The theory is if you were not living in your home, you would rent it out and have to include the rent received from your tenant in your income. By living in your own home, you are escaping taxation on that amount. Imputed income is not taxed in the United States, although it is taxed in other countries (Belgium, Finland, Denmark, Germany, and Sweden, to name a few). The most recent estimate from the Obama administration was a projected revenue loss of 96 billion for 2020. — Dorothy A. Brown, The Whiteness of Wealth, 665

Categorization

• DEFINE: Defines the obscure ‘imputed income’ subsidy precisely, with the mechanism and the revenue-loss figure.
• SEED: Imputed income is the tax code’s most race-neutral-looking homeownership subsidy that in practice skews white — a clean angle on how the deduction debate almost always ignores it.
• QUESTION: How do the other countries that tax imputed income handle it, and what would US adoption do to the racial wealth gap?