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The racial disparities in tax subsidies for homeownership

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2 years ago

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In the mid-1950s, Jessica Fulton’s grandparents moved from Mississippi to southern Illinois, where they built a new life for their family, she said at a tax policy event earlier this month.

“They created a community,” said Fulton, the vice president for policy of the Joint Center for Political and Economic Studies, a nonprofit policy advocacy group focused on improving socioeconomic status and civic engagement among African Americans. “They raised their children. They farmed their own land. They went to church. They created their own little American dream. So what does this have to do with tax policy? Why does it matter? I think that it matters because their economic status was really limited by the realities of their situation. And this isn’t necessarily something that the field of economics or tax policy typically accounts for.”

Fulton spoke as part of a program featuring a panel of experts in housing and tax policy hosted by the Urban-Brookings Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution focusing on independent analysis. At the event, the panelists talked about the racial disparities of the mortgage interest deduction. Financial advisors and tax professionals often discuss strategies for buying homes and making mortgage payments with their clients, who usually find their largest asset and means of building wealth for the long term in the form of owning their primary residence.

READ MORE: 11 tax tips on mortgages and homeownership 

For Black and Hispanic Americans, who are much less likely to own a home than their white counterparts, the deduction for mortgage interest payments comes in far less handy.

In fact, one panelist suggested that the doubled standard deduction under the 2017 Tax Cuts and Jobs Act that may expire at the end of next year has proven more effective than the itemized exemption for mortgage interest in lifting more people toward being able to buy a home. Other experts expressed support for other tax credits they viewed as more beneficial as well.

“The disparities are just this function of not just inequality in homeownership, but also income inequality. And it’s important to keep in mind that — even among households with the same income — homeownership rates are considerably lower for minority households, if you look throughout the income distribution,” Neil Bhutta, a special advisor to the Philadelphia Fed’s Consumer Finance Institute, said on the panel. “And so those two things combined to make the mortgage deduction particularly beneficial to white households.”

While he noted that he’s “not really a tax person” and called the persistent homeownership gaps “even within income” a puzzling problem, Bhutta said it would be difficult to imagine “being able to keep the home mortgage deduction and make it more equitable, without broader changes to the tax code and the standard deduction and things like that.”

The panelists spoke the same day that a study by the Tax Policy Center found that white families received 21% more than the average benefit of the mortgage interest deduction in 2019, while Black households got 54% of the mean and Hispanic Americans got 38%. If the Tax Cuts and Jobs Act expires at the end of next year, the share of all families claiming the mortgage interest deduction will double, according to the report’s authors, Janet Holtzblatt, Robert McClelland and Gabriella Garriga.

“Although the average benefit will rise for all groups, the relative disparities will not change substantially,” they wrote. “A surprising result is that, in the top income group, Black taxpayers receive a disproportionately larger benefit relative to white taxpayers under TCJA, but that relationship will be reversed after the expiration of the individual income tax provisions.”

Regardless, the study added to a long paper trail documenting the links between the legacy of housing discrimination in America and the enduring racial wealth gap. 

READ MORE: How taxes reflect and exacerbate racial wealth disparities 

“If you actually are able to benefit from the home mortgage interest deduction, then you’re likely to be one who’s able to take advantage of the things that it brings,” Derrick Plummer, the director of corporate communications for online filing software firm TurboTax parent Intuit, said on the panel. “But if you are not a homeowner, if you can’t even get into homeownership, let alone be able to stay in homeownership, that might not necessarily be the case. What we also know is that our tax code is extremely complicated — more than 6,000 pages long. And what we also recognize is that every April, the racial wealth gap is exacerbated, because of so many different things that we have seen over decades — whether it has been people of color being left out of a lot of these programs or whether it has been the inability for folks to actually obtain homeownership through a number of ways.”

The panelists and speakers shared other tax incentives they argued may help more Americans build wealth than the mortgage interest deduction. At its root, the main issue revolves around the goal of accumulating wealth, according to Kamila Sommer, the chief of the Consumer Finance Section of the Fed’s Board of Governors.

“It is not obvious to me that we have to have explicit policies targeting, promoting homeownership,” Sommer said, noting that the higher standard deduction under the Tax Cuts and Jobs Act boosted renters’ incomes. “It does increase their savings rate and allows them to get into homeownership or accelerate or aid the transition into homeownership. The mortgage interest rate deduction — just generally how I perceive it — is that it tends to benefit existing homeowners. And it’s very well-liked, but you can have policies which help people to increase household income and help them achieve homeownership through saving and ability to qualify for mortgages.” 

Tax credits for buying or building homes could hike up the share of households able to afford a home as well, according to Michael Neal, a senior fellow at the Urban Institute. Policymakers should consider “thinking about what tax systems do, not just in terms of the demand side, but also what it can do on the supply side as well,” he said.

“Certainly, the tax credit — at least the way that I read the literature — can have a relatively more powerful impact among those that have lower incomes,” Neal said. “When we think about housing supply, we are thinking about small builders, and the degree to which tax policy can certainly help to change their calculus. That could also have implications in terms of their ability to bring more affordable housing stock to market.”

READ MORE: Ask an advisor: Should I finish my mortgage right now?

The expanded child tax credit — a pandemic-era policy that has since lapsed and is now in a bill that’s currently stalled in the U.S. Senate — brought some economic relief to families as well, Fulton noted.  

“It lowered child poverty for Black children, but it also put money in the pockets of people across race and ethnicity, and kept our economy running — like it helps people to put food on the table,” Fulton said. “I am a firm believer that if we can be really thoughtful about how we design more inclusive policies — what is it, ‘The rising tide lifts all boats’ — it’s almost like it brings all of us. So that’s been really exciting to see.”

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Accounting

Global ESG Reporting Standards and Double Materiality Compliance

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5 days ago

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August 9, 2026

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Corporate accounting departments face expanding reporting expectations as international sustainability disclosure standards achieve regulatory enforcement across major global jurisdictions. Chief Accounting Officers (CAOs) and corporate controllers are establishing rigorous internal accounting controls to treat Environmental, Social, and Governance (ESG) metrics with the same data precision, auditability, and governance as traditional financial statements.

Regulatory Harmonization Under Global Sustainability Frameworks
The implementation of standardized sustainability reporting frameworks—notably rules established by international sustainability accounting boards—has created unified expectations for public and large private enterprises. Corporations must report standardized metrics covering greenhouse gas emissions (Scope 1, 2, and material Scope 3), energy utilization, workforce demographics, and supply chain governance.

In Europe and other participating international jurisdictions, double materiality principles are mandatory. Under double materiality, organizations must report both how external sustainability risks impact corporate financial performance, and how internal corporate operations affect surrounding environmental and social structures.

Integrating Sustainability Metrics into Core ERP Systems
To provide auditable non-financial data, enterprise organizations are integrating specialized carbon accounting and ESG management platforms directly into core ERP systems. Automated data collectors capture energy utility invoices, logistics fuel consumption metrics, and vendor compliance records in real time.

Establishing automated, traceable data pipelines ensures that non-financial reporting is supported by clear audit trails. This structured approach allows external financial auditors to provide reasonable assurance on sustainability disclosures during annual corporate reporting cycles.

Financial Impacts and Capital Market Disclosure
Accurate ESG reporting directly influences corporate cost of capital and institutional credit ratings. Commercial lenders and institutional asset managers systematically incorporate sustainability metrics into risk pricing models. Companies that demonstrate transparent, verifiable progress in operational energy efficiency and climate risk mitigation benefit from expanded access to green bond markets and lower debt pricing.

Action Steps for Accounting Leadership
1. Implement Double Materiality Frameworks: Conduct comprehensive assessments to identify material financial and operational sustainability metrics.
2. Build Auditable Non-Financial Data Pipelines: Automate ESG data collection within core accounting software to ensure data integrity.
3. Align Sustainability with Annual Financial Filings: Prepare non-financial disclosures concurrently with financial statements to satisfy regulatory audit expectations.

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Accounting

Modernizing Internal Controls: Machine Learning and Continuous Monitoring in Auditing

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1 week ago

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August 5, 2026

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Internal audit departments and corporate risk managers are modernizing internal control frameworks by shifting from periodic sampling techniques to continuous monitoring and machine learning analytics. As operational data volumes increase across enterprise organizations, automated control testing ensures financial integrity, prevents corporate fraud, and streamlines annual audit engagements.

The Limitation of Periodic Audit Sampling
Historically, internal and external auditors evaluated internal controls by reviewing random samples of financial transactions—often analyzing less than five percent of total ledger entries. In complex enterprise environments, periodic sampling methods carry inherent risks of overlooking localized financial misstatements, unauthorized disbursements, or operational control breakdowns.

In 2026, progressive internal audit functions are utilizing automated continuous monitoring platforms that evaluate one hundred percent of financial transactions in real time. Continuous control auditing systems continuously monitor general ledger entries, procurement approvals, and expense reimbursements across all operating subsidiaries.

AI-Powered Fraud Detection and Anomaly Identification
Machine learning models trained on historical corporate financial data excel at identifying subtle transactional anomalies that indicate potential fraud or operational error. Automated systems instantly flag duplicate invoice payments, unapproved vendor creation, unusual journal entry timing, and unauthorized override of authority thresholds.

When an anomaly is detected, the automated auditing platform generates an instant risk alert, allowing internal audit teams to investigate root causes immediately. Early detection prevents minor operational errors from escalating into material weaknesses in financial reporting.

Streamlining External Audit Preparation
Continuous internal control monitoring delivers significant benefits during annual external financial audits. External audit firms can review continuous audit logs and automated control testing documentation, reducing the time required for manual field testing.

This integrated approach lowers overall audit compliance fees, reduces administrative burdens on corporate accounting staff, and provides senior management and audit committees with real-time visibility into the organization’s overall risk profile.

Core Implementation Guidelines
1. Transition to 100% Data Testing: Replace legacy sampling methods with automated continuous audit monitoring systems.
2. Deploy Anomaly Detection Algorithms: Implement machine learning models to identify unauthorized transactions and operational control overrides.
3. Align Internal and External Audit Workflows: Coordinate continuous control testing protocols with external auditors to optimize annual compliance cycles.

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Accounting

Automated Tax Compliance and Global Regulatory Harmonization in 2026

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1 week ago

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August 5, 2026

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Corporate tax accounting departments are navigating an era of unprecedented regulatory complexity as global tax harmonization frameworks take full effect alongside real-time digital tax reporting mandates. Tax directors and accounting teams are adopting cloud-based tax compliance automation tools to manage multi-jurisdictional tax liabilities and satisfy stringent reporting rules across international jurisdictions.

Implementation of Global Minimum Tax Provisions
The implementation of international tax reform agreements—notably the Pillar Two global minimum tax framework—has reshaped multinational corporate tax planning. Multinational enterprises with consolidated revenues exceeding established thresholds must ensure an effective tax rate of at least 15% across every jurisdiction in which they operate.

Accounting teams are implementing specialized tax calculation modules integrated directly into enterprise resource planning (ERP) platforms. These automated tools calculate effective tax rates per country, identify top-up tax liabilities, and generate standardized compliance documentation required by national tax authorities.

Real-Time Digital Invoicing and E-Reporting Mandates
Tax authorities across Europe, Latin America, and Asia-Pacific have enacted mandatory electronic invoicing (e-invoicing) and continuous transaction controls (CTC). Under these systems, corporate transaction data must be submitted electronically to government portals in real time at the point of sale or invoice issuance.

This shift toward continuous digital tax reporting eliminates traditional annual tax audits in favor of ongoing automated compliance monitoring. Accounting departments are upgrading invoicing software to ensure seamless XML data formatting, digital signature authentication, and real-time validation against tax authority databases.

Automation and Data Analytics in Corporate Tax Strategy
To keep pace with dynamic tax legislation, tax departments are transitioning from reactive compliance teams to proactive strategic advisors. Machine learning algorithms analyze corporate transactional data to identify tax credits, research and development (R&D) incentives, and cross-border transfer pricing adjustments.

By automating routine tax return filings and calculations, corporate tax directors can focus on long-term capital structuring, evaluating the tax implications of corporate mergers, and optimizing international supply chain networks.

Strategic Priorities for Tax Executives
1. ERP System Upgrades: Ensure enterprise software is capable of generating real-time, granular tax data required for global minimum tax compliance.
2. E-Invoicing Integration: Implement scalable e-invoicing platforms to satisfy regional continuous transaction control regulations.
3. Strategic Tax Analytics: Utilize predictive tax modeling tools to evaluate structural changes in corporate operations and cross-border trade.

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