How does your mortgage tax break compare?

By MSN Money

Americans take $457 billion a year in deductions for mortgage interest and local property tax. But it turns out the size of the break varies widely depending on where they live.

Fast-growing areas with high home prices have the biggest interest deductions, according to a recent study released by the National Association of Home Builders (NAHB).

The study used the most recent IRS data -- from tax year 2003 -- to compile deductions for each of the country's 435 congressional districts, showing Congress how significant the tax write-offs are for residents in their area.

It also clearly shows where housing costs and real-estate taxes are steepest.

California on top

The top was California, where taxpayers deducted $64.9 billion, or about $14,000 each. The state's 14th congressional district, which encompasses parts of San Mateo, Santa Clara and Santa Cruz counties, deducted $3.2 billion, or $35,000 per household.

Deductions in that district surpassed the combined total of six states: Alabama, West Virginia, Wyoming, Vermont and both North and South Dakota. The five congressional districts with the lowest mortgage deductions are in the New York City area, where more residents rent. Nationwide, 35 million taxpayers deducted $338 billion in home mortgage write-offs, averaging $9,650.

Residents of one congressional district on Long Island wrote off $1.25 billion in property taxes, more than the total of six states and Washington, D.C. Deductions in New York's 3rd District exceeded the $1.2 billion total in Arkansas, Delaware, the District of Columbia, Hawaii, North and South Dakota and Wyoming.

Big real estate tax breaks

Thirty-nine million taxpayers deducted a total of $119 billion in real-estate taxes, or an average deduction of more than $3,000 each.

The data show the breadth of the home-tax breaks. While there are calls to balance the federal deficit by rolling back tax cuts for mostly affluent Americans, this study could help fend off future attempts to touch home write-offs.

“Because the mortgage interest and real-estate deductions significantly reduce federal tax liabilities for homeowners, they are important tools for promoting homeownership,” said Jerry Howard, chief executive of the NAHB, which supports the current tax-break system. “The report shows that millions of working families across the nation use and depend upon these important tax incentives to help them maintain their current standard of living.”

Current tax rules allow tax write-offs up to $1.1 million a year -- $1 million for primary home loan balances and $100,000 in home-equity debt. If the deductions were capped at a lower amount, the federal treasury would save tens of billions of dollars a year.

Uncle Sam losing out

The Congressional Joint Committee on Taxation estimates that Uncle Sam will lose $69.4 billion in 2006 because of the home-tax credits. That estimate is lower than the 2003 figures because actual deductions are based on an individual's tax rate, not dollar for dollar.

Mortgage Tax Breaks
State	Avg. interest deduction	Avg. property tax deduction
Alabama	$9,009	$868
Alaska	$9,589	$2,910
Arizona	$10,646	$1,741
Arkansas	$6,998	$979
California	$14,217	$3,323
Colorado	$11,247	$1,793
Connecticut	$10,069	$4,769
Delaware	$9,040	$1,601
District of Columbia	$11,759	$2,345
Florida	$10,050	$3,397
Georgia	$9,072	$2,042
Hawaii	$12,766	$1,126
Idaho	$8,046	$1,803
Illinois	$9,878	$4,129
Indiana	$7,594	$1,683
Iowa	$6,754	$2,073
Kansas	$7,478	$2,197
Kentucky	$7,051	$1,415
Louisiana	$7,761	$1,131
Maine	$6,888	$2,769
Maryland	$9,998	$2,686
Massachusetts	$9,902	$3,722
Michigan	$8,400	$2,892
Minnesota	$8,997	$2,124
Mississippi	$7,284	$1,253
Missouri	$7,694	$1,940
Montana	$7,294	$1,912
Nebraska	$7,568	$2,719
Nevada	$11,552	$2,133
New Hampshire	$9,014	$4,830
New Jersey	$9,767	$6,005
New Mexico	$8,742	$1,433
New York	$9,563	$5,181
North Carolina	$8,545	$1,786
North Dakota	$6,808	$2,835
Ohio	$7,291	$2,418
Oklahoma	$5,710	$1,337
Oregon	$9,072	$2,569
Pennsylvania	$7,635	$3,361
Rhode Island	$8,037	$3,717
South Carolina	$7,874	$1,486
South Dakota	$8,387	$2,541
Tennessee	$9,052	$1,920
Texas	$9,379	$4,501
Utah	$8,992	$1,531
Vermont	$7,183	$3,845
Virginia	$10,155	$2,495
Washington	$11,223	$3,048
West Virginia	$6,976	$1,059
Wisconsin	$6,929	$3,585
Wyoming	$9,772	$1,639
U.S. average	$9,650	$3,093

So are these tax breaks safe? Calls for belt-tightening and a wider tax base are likely as the federal deficit balloons. A change in the rules would also cut the home-tax disparity between residents of the high-cost coasts and area of the country with low housing costs.

After California, the states with the biggest mortgage write-offs were New York ($19.7 billion), Florida ($17.6 billion), Texas ($16 billion), Illinois ($15.9 billion), New Jersey ($12.9 billion), Michigan ($11.5 billion), Virginia ($11.3 billion), Ohio ($10.9 billion), Pennsylvania ($10.8 billion) and Georgia ($10.6 billion).

Areas with both high home prices and real-estate tax rates had more property tax deductions. New Jersey was highest, with an average real-estate tax deduction of $6,000, followed by New York ($5,181), New Hampshire ($4,830), Connecticut ($4,769), Texas ($4,501) and Illinois ($4,129).

Congress is likely to consider tweaking the tax system in order to catch up with budget deficits. This study suggests that if Congress is looking for ways to balance the budget, these huge write-offs for homes could be money in the bank.

-- By MSN Money staff, with material from wire reports.