The biggest piece of the Proposed Tax Reform that we as Real Estate Professionals are getting information on is the Mortgage Interest and Tax Deduction Piece.
To simplify the tax code, Republicans have proposed eliminating nearly all tax write-offs including those for state and local taxes, then doubling the standard deduction. This would eliminate the incentive to itemize and should drastically reduce the number of taxpayers who do so.
Currently, many taxpayers use itemized deductions, claiming write-offs for things like charitable contributions, interest paid on a mortgage and state and local taxes. If the standard deduction becomes larger, fewer taxpayers will need to itemize, reducing the incentive to hold a mortgage or contribute to charity.
The National Association of Realtors opposes this plan. They are asking their members to Take Action and tell congressional leader that we want Tax Reform, but not at the expense of this deduction as it would harm millions of homeowners in the loss of tax deductions (which would be replaced by a larger standard deduction) and it would lower the values of homes across the country by 10%. Although from what we can read, the Tax Reform plan was going to keep these deductions for those who itemize and increase the standard deduction for those who don’t..
The National Association of Home Builders were working with the White House and Members of Congress to move the plan forward with some adjustments. They liked that the Mortgage Interest Deduction was to be kept, but not the fact that the effectiveness of it would be diminished as NAR above claims. The simpler system and lower rates for businesses, but were concerned on that we might lose the deduction for business interest. However, just released Saturday, the NAHB, will not support the House Republicans’ upcoming tax reform legislation because of the mortgage interest and property tax piece.
The National Real Estate Investor has some other issues for high networth individuals to consider.
- 1031 Exchange:
- Reduction of Taxes for Pass Throughs
- Repeal of state and local property, sales and income tax deductions on federal returns
- Elimination of Individual alternative minimum tax
- Abolishment of estate and generation-skipping taxes
And in a recent podcast by the Real Wealth Network that takes a look at tax reform, they don’t see much in proposed changes for the landlord other than the reduction in tax rates for pass through entities.
What are your thoughts on tax reform?. Will it help you or hurt you in your business or maybe in the long run, not see much significant change over all?