=+c. An alternative way for the government to encourage home ownership would be to offer a tax credit instead of a tax deduction. A tax credit would allow all taxpayers to subtract a fraction k of their annual mortgage payments directly from the tax bill they would otherwise owe. (Note:

Be careful. A tax credit is deducted from tax payments that are due, not from the taxable income.) For the households in

(a) and (b), illustrate how this alters their budget if k 5 0.25.