Congressional Republicans plan to release their long-awaited tax reform bill on Thursday, and there are a variety of reform provisions that may impact homeowners.
- An increase in the standard deduction — While many homeowners, especially those with higher incomes and high mortgages, itemize their deductions, the higher standard deduction may exceed what could have been itemized, potentially weakening the incentive to make a home purchase.
- A standardized property tax deduction — This provision is intended to simplify the existing deduction, which allows homeowners to deduct their state and local property taxes from their federal taxable income and which currently can only be claimed by those who itemize their taxes.
- An elimination of the mortgage interest deduction for homebuyers with mortgage debt over $500,000. — The fate of the mortgage interest deduction was bandied about throughout the year, with many concerned that reform plans would counter campaign promises made by the current administration to leave the deduction untouched at its $1 million-of-mortgage-debt level.
While preservation of the deduction in its current form for existing homeowners is intended to be a compromise, capping future deductions at $500,000 of mortgage debt is unlikely to assuage the fears of the National Association of Realtors, which has been lobbying against any alterations to the deduction.
“We are currently reviewing the details of the tax proposal released today, but at first glance it appears to confirm many of our biggest concerns about the Unified Framework,” NAR President William E. Brown said in a statement. “Eliminating or nullifying the tax incentives for homeownership puts home values and middle class homeowners at risk, and from a cursory examination this legislation appears to do just that.”
The new deduction cap has major implications for the DC region and the District in particular, as being able to buy a house for $500,000 is far from guaranteed in many neighborhoods.
UrbanTurf will continue to keep an eye on the bill’s progress going forward.
Correction: This article previously stated that the mortgage interest deduction would apply to houses valued above $500,000. That was a misstatement that has since been corrected; the deduction would be eliminated for future homeowners with mortgage debt over $500,000.
This article originally published at http://dc.urbanturf.com/articles/blog/how_proposed_tax_reform_may_impact_homeowners/13209
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