Housing Assistance: An Inventory of Fiscal Year 2010 Programs, Tax Expenditures, and Other Activities

U.S. Government Accountability Office

Mortgage subsidy bonds interest exclusion

Administering Agency/Entity Internal Revenue Service
Short Description Allows holders of mortgage subsidy bonds to exclude interest from taxable income. Mortgage subsidy bonds are state and local bonds issued to provide mortgages at below-market interest rates on owner-occupied principal residences for first-time homebuyers. These bonds were subject to an annual volume cap (for private activity bonds) equal to the greater of $90 per state resident or $274 million in 2010. A variety of restrictions exist on state and local mortgage bond programs, including restrictions on the home purchase price, on the income of the homebuyers, and on the portion of bond proceeds targeted for lower-income areas.
Primary Purpose Increase availability of mortgage loans
Type of Housing Supported Homeownership
Type of Assistance Tax exclusion, exemption, or deduction
Estimated Revenue Loss1 $1,230,000,000; mortgage subsidy bonds are classified as private activity bonds because a substantial portion of their benefits accrues to individuals rather than to the general public.

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