Taxes and the User Cost of Capital for Owner-Occupied Housing

32 Pages Posted: 4 Jul 2004 Last revised: 18 Jul 2010

Patric H. Hendershott

University of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER)

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Date Written: July 1982

Abstract

Owner-occupied housing is said to be favored in the tax code because mortgage interest and property taxes can be deducted in the computation of one's income tax base in spite of the fact that the returns from owner- occupied housing = not taxed. The special tax treatment reduces the user cost of capital for owner-occupied homing. The issue treated in this paper is the measurement of the tax rate to be employed in the user cost calculations. It is argued that different tax rates am appropriate for the tenure choice and quantity-demanded decisions, and that these values depend on the detailed tax position of the household and the method of finance. Average 1977 tax rates for households in different income ranges are calculated using the NBER TAXSIM microeconomic data file on individual tax returns

Suggested Citation

Hendershott, Patric H. and Slemrod, Joel B., Taxes and the User Cost of Capital for Owner-Occupied Housing (July 1982). NBER Working Paper No. w0929. Available at SSRN: https://ssrn.com/abstract=299801

Patric H. Hendershott (Contact Author)

University of Aberdeen - Centre for Property Research ( email )

Aberdeen AB24 2UF
Scotland

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Room R5396
Ann Arbor, MI 48109-1234
United States
734-936-3914 (Phone)
734-763-4032 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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