 Someone paying a 25% income tax rate would receive $250 back from the government for $1,000 expended in home mortgage interest.While there is no deduction for payroll taxes and most do not itemize the income tax deduction for full benefit, this preferential treatment of mortgage interest encourages households to spend relatively more of their income on housing than would otherwise be the case.The FairTax would be tax free on mortgage interest up to the basic interest rate as determined by the Federal Reserve.