Tax treatment of mortgage interest; prescribing an effective date

Oregon HB4136 proposed to eliminate the tax deduction for mortgage interest on second homes, meaning that taxpayers could no longer deduct these expenses from their personal income taxes unless they were actively selling the property. The bill aimed to create the Oregon Homeownership Opportunity Account, which would use the increased tax revenue from this change to help with down payment assistance for homebuyers. It was set to take effect in 2026 but ultimately failed.

Supporters of HB4136 argue that ending the mortgage interest deduction for second homes promotes fairer tax policy and helps address housing affordability by redirecting funds to assist first-time homebuyers. They believe that the new Homeownership Opportunity Account would provide much-needed support for those trying to enter the housing market.

Critics of HB4136 contend that removing the mortgage interest deduction for second homes unfairly penalizes homeowners and could discourage investment in real estate. They argue that this measure could make it more difficult for families to maintain their second homes, ultimately harming the housing market.