When it comes to supporting middleclass homeowners, the tax reform bill released in Congress misses the mark, plain and simple.
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First, while the bill nearly doubles the standard deduction, it preserves the mortgage interest deduction only for existing mortgages and new purchases with loans of $500,000 or less. According to our analysis, this nullifies the homeownership incentive for all but roughly 5 percent of the country. That makes America’s century-old tradition of encouraging homeownership through the tax code all but obsolete.
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The bill doesn’t stop there. It imposes a new cap on property tax deductions (at $10,000) and eliminates the widely used deduction for state and local income [SALT] or sales taxes altogether. That means nearly every tax filer in America will experience “double taxation” on his or her income.
Realtors are also strongly concerned about proposals to alter the capital gains exclusion, which homeowners use when they sell a home under current law. This longstanding provision helps Americans preserve the equity in their homes for their retirement and other long-term needs, but that protection is further limited by the GOP House bill unveiled this week.
While there are some differences, the legislation closely tracks the House Republican blueprint for tax reform released last year. Our analysis of that reform proposal found it would deliver an $815 average annual tax increase on middle-class homeowners.
What we’re left with is an outright assault on homeownership in America: less incentive to buy a home, fewer protections in a home sale, and higher taxes for middle-class homeowners.
We realize this is just the beginning of a much longer discussion, and we don’t believe this is the outcome that House leaders intended or House members want. Realtors believe, as GOP leaders do, in the promise of a better tax system.
This legislation in its current form simply isn’t the way to get there.
William E. Brown is 2017 President of the National Association of Realtors®