NAR: GOP’s Tax Plan ‘Attacks Homeownership’
November 6, 2017
|Republican strategist Steve Schmidt predicted during the REALTORS® Conference & Expo in Chicago on Saturday that Congress would not pass the GOP’s tax proposal. Congressional Republicans are pushing the bill, he said, simply because they need a legislative victory. Read more.|
The recently released GOP tax reform plan would decrease corporate tax rates by 43 percent while raising taxes on millions of middle-class homeowners. “This plan attacks homeownership and sticks future generations with a $1.5 trillion price tag,” National Association of REALTORS® 2017 President William E. Brown says.
The bill, called the “Tax Cuts and Jobs Act,” would lower some tax rates while nearly doubling the standard deduction. These appear to be positive changes, but a more detailed look reveals that they’re less generous than they seem. That’s because the standard deduction—which would be increased to $12,000 for single filers and $24,000 for married couples—would be accompanied by the elimination of the personal exemption and exemptions for dependents.
The alternative is for families to itemize their deductions, but the bill eliminates most of those. Only the deduction for charitable contributions remains completely intact; all the others are either eliminated or curtailed. Although the mortgage interest deduction has been retained, the maximum loan amount for interest deductibility would be cut in half to no more than $500,000 for new mortgages, and the deduction would be eliminated outright for second mortgages and new home equity lines of credit.
The deduction for real property taxes would also be retained, but it would be capped at $10,000—far lower than the tax bills of many households in higher-tax states. All of the other itemized deductions, including the one for state and local income taxes, would be eliminated. These changes combined will drive many homeowners to take the standard deduction and end up paying hundreds of dollars more in taxes than they do today, NAR estimates. “Homeowners in all 50 states would be double-taxed on the money they pay for state and local taxes,” Brown says.
A bombshell awaits home sellers as well. The capital gains exclusion on the sale of a principal residence, which today is capped at $250,000 for single filers and $500,000 for married couples, would be made much harder to use. Homeowners would have to live in their house for at least five of the last eight years, up from two in the last five, to take the exclusion. And the exclusion would decrease when household income reaches above a certain threshold. “If you buy a home and then have to move within five years, you could be hit with a big tax bill under this plan,” Brown says.
As a result of these changes, home values could plummet 10 percent or more, NAR estimates. That will harm all homeowners, regardless of whether they’re affected personally by the tax changes. “Hard-working homeowners will lose money when their home values fall, while corporations will get a huge tax break,” Brown says.
The bill threatens to intensify the decline in the homeownership rate—already at a 50-year-low—Iona Harrison, 2017 chair of NAR’s Federal Taxation Committee, told NAR’s board of directors Monday. “I don’t have to tell this audience about the many ways homeownership provides social benefits to communities, increasing neighborhood stability and community involvement,” she said.
NAR has launched a campaign asking REALTORS® and homeowners to register their opposition to the bill. Members who text “Action” to 30644 will receive a text that enables them to quickly get a message to their members of Congress. So far, more than 135,000 members have responded to the call for action.
Both tax reform and flood insurance were hot topics at the forefront of real estate pros’ minds during the REALTORS® Conference & Expo in Chicago over the weekend. Attendees got the scoop on how regulations, congressional actions, and White House proposals might impact the industry. Here are a few of the stories REALTOR® Magazine covered on the GOP’s tax reform proposal, the future of flood insurance, and more.
While the GOP tax plan will not increase the GDP, the real estate market does hold the key to economic growth, according to National Association of REALTORS® Chief Economist Lawrence Yun and Ken Rosen, founder of real estate research firm Rosen Consulting Group. Learn how specific initiatives that support home ownership can make a real impact on our country’s economy.
“This is a massive corporate tax cut for the biggest companies in the world,” Steve Schmidt, a top adviser to President George W. Bush’s administration, told REALTORS®. “It’s not a tax proposal that benefits small business. It adds a trillion and a half dollars to the debt, and it’s a massive tax increase if you live in a high-cost state.”
NAR Senior Legislative Policy Representative Austin Perez gave REALTORS® the inside-the-Beltway scoop on the NFIP. Learn about the major sticking points and how the short-term extension may lead to a longer-term revamping of the program, which is tens of billions of dollars in debt after major storms over the last decade.
Your clients might think the GOP’s tax plan will benefit them, but they’re likely to be mistaken. Learn about the bombshells awaiting property owners and middle-income workers that are hiding in the bill currently making its way through the U.S. House of Representatives.
Updated: September 13, 2019