The current GOP plan would preserve the mortgage interest deduction, but decrease the number of homeowners likely to take it, according to The Hill. The plan would nearly double the standard deduction – and taxpayers can only claim the mortgage interest deduction if they itemize their deduction rather than taking the standard deduction.
So while the mortgage interest deduction is protected in theory, said NAR President William E. Brown, it’s nearly eliminated in practice.
“This proposal recommends a backdoor elimination of the mortgage interest deduction for all but the top 5% who would still itemize their deductions,” Brown said in a statement. “When combined with the elimination of state and local tax deduction, these efforts represent a tax increase on millions of middle-class homeowners. That tax increase flies in the face of a reform effort ostensibly aimed at lowering the tax burden for Americans. At the same time, the lost incentive to purchase a home could cause home values to fall.”
The White House, however, dismissed the idea that the GOP tax plan would hurt the housing market.
“People don’t buy homes because of the mortgage deduction,” White House National Economic Council Director Gary Cohn said during a press briefing. “The number-one reason why people buy homes is they’re excited and optimistic about the economy. They have a job today, they feel confident they’re going to have a job tomorrow, and their kids are going to get a job and their spouse has a job.”
Cohn insisted it was overall consumer confidence, not a tax break, that would encourage homebuying.
“We have to get America back to a place where people feel excited and exuberant about the economy,” he said. “When they do that, they’ll go out and spend money, they’ll buy homes.”
The popular mortgage interest deduction continues to be a hurdle in tax reform, with a major industry group criticizing Republican lawmakers’ latest tax plan for its handling of the deduction.