Tax incentives The Act also increased incentives favoring investment in owner-occupied housing relative to rental housing. Prior to the Act, all personal interest was deductible. Subsequently, only home mortgage interest was deductible, including interest on home equity loans. The Act phased out many investment incentives for rental housing, through extending the depreciation period of rental property from 15–19 years to 27.5 years. It also discouraged real estate investing by eliminating the deduction for passive losses. To the extent that low-income people may be more likely to live in rental housing than in owner-occupied housing, this provision of the Act could have had the tendency to decrease the new supply of housing accessible to low-income people. The Low-Income Housing Tax Credit was added to the Act to provide some balance and encourage investment in multifamily housing for the poor.
Tax incentives The Act also increased incentives favoring investment in owner-occupied housing relative to rental housing. Prior to the Act, all personal interest was deductible. Subsequently, only home mortgage interest was deductible, including interest on home equity loans. The Act phased out many investment incentives for rental housing, through extending the depreciation period of rental property from 15–19 years to 27.5 years. It also discouraged real estate investing by eliminating the deduction for passive losses. To the extent that low-income people may be more likely to live in rental housing than in owner-occupied housing, this provision of the Act could have had the tendency to decrease the new supply of housing accessible to low-income people. The Low-Income Housing Tax Credit was added to the Act to provide some balance and encourage investment in multifamily housing for the poor.