Are Owner and Renter Housing treated equally under the federal tax code?

UC-Irvine, The MacArthur Foundation and the Rockefeller Foundation sponsored a conference this week on "Housing after the Fall."

The conference featured a number of interesting papers, but one of the most interesting conversations happened in the aftermath of Marge Turner and Denise DiPasquaule's talks on rental housing. They both pleaded for equal treatment of owner and renter housing (as did Stuart Gabriel the day before). But Bill Wheaton and John Weicher made provokative and possibly correct arguments about why the two house tenure are basically treated equally.

The biggest benefit of owner relative to renter housing is that imputed rent is not taxed. But as John points out, those who own their homes with equity are largely the elderly, many of whom have low cash incomes, which means that they have low marginal tax rates a so get small after tax benefits from owning. Both owners and landlords get to deduct interest and property taxes (although owners who pay the AMT cannot deduct property taxes). Landlords can deduct depreciation and maintenance; owners cannot. Landlords are probably in higher tax brackets than renters. Owners are (largely) exempt from capital gains taxes, but so are landlords, who can use like-kind exchanges to defer capital gains taxes forever.

Bill said he did a back of the envelope calculation that shows that the tax code treats the two tenure types about the same. The topic merits further research, but it may mean that those who think owner housing gets treated preferably may be wrong.