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A mortgage interest deduction, or MID for short, allows taxpayers to deduct any mortgage interest paid on their primary or secondary home â€” up to $1 million each year. Letâ€™s do some math: Say you buy a home and take out a 30-year mortgage worth $200,000 with an interest rate of 4.5 percent. If your combined state and federal tax rate is 31 percent, you could save an average of $1,703 each year by using a mortgage interest deduction. That brings your interest rate down to just 3.1 percent. Seems like a pretty good deal, right? So why, then, did two-thirds of American homeowners choose to forgo this option altogether?Perhaps because it meant complicating their taxes a bit. In order to receive an MID, you have to itemize your taxes instead of just filing for a standard deduction. In 2015, the standard deduction for a head of household was $9,250. If your home expenses add up to less than that, then thereâ€™s no point in taking the time to itemize your taxes: The standard deduction covers them. The MID is one of the most expensive tax breaks we have: It cost the government about $73.9 billion in 2015, according to the U.S. Treasury. And because so many Americans donâ€™t take advantage of it, the benefits fall disproportionately to the wealthy. The top 20 percent of earners get 75 percent of the benefits, and the top 1 percent get 15 percent. But some argue that eliminating or reducing the deduction could cause home prices to decline by up to 11 percent. That means about a $25,000 reduction in housing equity for a typical homeowner. Even if the changes are mostly in high-income areas, itâ€™s possible that they could destabilize the entire housing market. So there you have it. Itâ€™s a pretty complicated and sticky issue. But the next time someone brings up mortgage interest deductions, at least you can say, â€śNow I get it.â€ťÂ Have a question about your taxes?Â Submit them here, and join our live tax chat on Tuesday, April 5 at 1 pm ET.Investing EducationTaxesmortgage interest deductioninterest rate