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

Patric H. Hendershott, Joel Slemrod

NBER Working Paper No. 929 (Also Reprint No. r0406)
Issued in July 1982
NBER Program(s):Public Economics

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

This paper is available as PDF (546 K) or via email

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w0929

Published: Hendershott, Patric H. and Joel Slemrod. "Taxes and the User Cost of Capital for Owner-Occupied Housing." Real Estate Economics, American Real Estate and Urban Economics Association, Vol. 10, No. 4 (December 1982) , pp. 375-393. citation courtesy of