How Trump's Tax Proposal Would Affect DC Area Households
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A new report out this week examines how the current presidential administration’s plan for tax reform might impact homebuying.
One of the key shifts as outlined by the Trulia report is the impact of a doubled standard deduction on the tax benefits of homeownership for a certain sector of buyers. The report concludes that claiming a mortgage-interest tax deduction (MITD) would be rendered unnecessary if the standard deduction is increased to $24,000 from the current $12,700.
The homebuyers who would be most affected by this change are those who earn between $68,540 and $129,422 annually and who are looking to buy homes in the $358,000-$676,000 range (including an assumed 10 percent down payment). Nearly 22 percent of the nationwide housing stock is priced within that range, neutralizing the benefit of the MITD for a fifth of the housing supply.
Looked at another way, the share of households nationwide that would benefit from itemizing their MITDs under Trump’s plan would drop from the top 43 percent of household earners to the top 17 percent. The DC area would be the seventh-most impacted region, with the share of households that would benefit from the MITD decreasing by 30 percentage points, from the top 62 percent to the top 32 percent.
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In the DC region, 38.9 percent of the housing stock is priced within the most-affected range, cancelling the benefit of the MITD for almost 30 percent of buyers.
Overall, however, Trulia concludes that if the reform proposal is passed into law, the housing market would withstand the changes simply because an increased standard deduction would still represent a huge savings for many households, potentially facilitating renter households’ abilities to save up for a down payment — if they choose (or are able) to do so. Additionally, some households may have more itemized deductions in addition to mortgage interest, making the combined deductions total more than the standard deduction.
Trulia honed in on the housing price range by pinpointing the home prices that correspond with a years’ worth of mortgage payments totaling between the current and proposed standard deductions. Buyers’ incomes are extrapolated assuming a 36 percent mortgage debt-to-income ratio.
See other articles related to: home buying, mortgage interest deduction, taxes, trulia, trulia trends
This article originally published at https://dc.urbanturf.com/articles/blog/how_trumps_tax_proposal_will_affect_dc_households/12581.
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