Black Hills Knowledge Netowork

Lawrence County claims the highest average mortgage interest tax deduction in the Black Hills region.
Lawrence County claims the highest average mortgage interest tax deduction in the Black Hills region.
Brookings Institution map
December 8, 2014

Mortgage Interest Deduction Comparisons Offer Alternate Window on Government Subsidies

South Dakotans are often criticized for their dependence on federal dollars. To some extent, this is a matter of perspective. It’s true that for every $1.00 South Dakotans pay in federal income tax, the state receives $1.16 from the federal government. This “return on taxpayer investment,” however, only ranks South Dakota 24th among the 50 states.

When federal funds are considered as a percentage of total state revenue, South Dakota finishes 49th among the 50 states. In 2013, more than 41.5 percent of the state’s annual budget came from Washington.

Tax credits or “expenditures” aren’t figured into the subsidies a state receives from the federal government, but maybe they should be. One of the largest — the mortgage interest deduction — costs the federal government $69.7 billion a year, according to a new study by the Brookings Institution, an amount that is roughly equivalent to the $73.9 billion budgeted in 2014 for the Supplemental Nutrition Assistance Program for poor families in the United States.

Most of the tax expenditure for the mortgage interest deduction benefits relatively high-income households on the East and West Coasts and in urban areas where real estate prices are comparatively high.

The Brookings study offers an interactive county-by-county map of the average mortgage interest deduction and the share of county residents who claim the deduction. (Remember that only those people who itemize deductions on their tax return can qualify.)

In South Dakota, not surprisingly, the counties with the highest percentage of households who take the mortgage interest deduction are in the Sioux Falls and Rapid City metropolitan areas, although Stanley and Hughes Counties also rank relatively high. The rest of the state, like most of the Great Plains region, has some of the lowest percentages in the country.

With an average mortgage interest deduction of $9,051 in 2013, Lincoln County ranked the highest in the state, followed by Union County at $8,993, Lawrence County at $8,400 and Roberts County at $8,290. Lincoln County also had the greatest percentage of taxpayers who claimed the mortgage interest deduction (28 percent), followed by Union County (21.3 percent).

Among Black Hills counties, the chart reveals:

 

Average Mortgage Interest Deducted (in dollars)

Share of Taxpayers Claiming the Mortgage Interest Deduction

Butte County $7,412  10.2%
Custer County $8,010  16.7%
Fall River County $6,957  10.2%
Lawrence County $8,400  15.7%
Meade County $7,978  17.2%
Pennington County $8,100  16.0%
Shannon County $7,700  0.5%

Access the Brookings Institution’s county-by-county interactive map on mortgage interest deductions or read The Mortgage Interest Deduction Across Zip Codes report from the Urban-Brookings Tax Policy Center.

 

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