The first part of this document provides economic data with respect to household debt. The second part provides a description of the major present-law Federal income tax rules governing household debt. The third part provides a discussion of the economic incentives created by the major present-law Federal income tax rules governing household debt. The last part provides a comparison of the tax treatment of common types of household debt in seven other countries: Australia, Canada, France, Germany, Japan, Mexico, and the United Kingdom. A companion document3 relates to business debt and provides a description of present law Federal tax rules, economic data, and a discussion of business capital structures (without taking into account Federal tax rules) as well as of the economic incentives created by the present-law Federal income tax rules governing business debt.

The second part provides a description of the major present-law Federal income tax rules governing household debt. The third part provides a discussion of the economic incentives created by the major present-law Federal income tax rules governing household debt. The last part provides a comparison of the tax treatment of common types of household debt in seven other countries: Australia, Canada, France, Germany, Japan, Mexico, and the United Kingdom. A companion document3 relates to business debt and provides a description of present law Federal tax rules, economic data, and a discussion of business capital structures (without taking into account Federal tax rules) as well as of the economic incentives created by the present-law Federal income tax rules governing business debt. Household debt principally consists of home mortgage debt and consumer credit (such as automobile loans, student loans and credit card debt).4 While debt as a percentage of disposable personal income has fallen below recent peak levels, it remains high by historical standards. The ratio of total credit market debt outstanding in the household sector to disposable personal income is roughly 20 percent higher in 2010 than it was in 2000, 40 percent higher than in 1990, and twice that of 1960. This growth is due largely to the growth in home mortgage debt.