The National Association of Realtors knows the complexity of the current tax system and seeks to assure that tax reforms support the goals of homeownership and freedom to buy, maintain and sell real estate.
Under current tax law, homeowners are allowed a deduction for mortgage interest paid on mortgage debt of up to $1 million, and is available for interest on mortgages for a principal residence and one additional residence. The $1 million limitation represents the combined allowable debt on two residences.
Tax reform has been near the top of the legislative agenda for several years now, even though that term has a generally different meaning for Republicans and Democrats. As part of its budgets for several years, the Obama Administration proposed reducing the value of all itemized deductions, including the mortgage interest deduction for higher-income taxpayers.
However, in mid-2016 congress released a comprehensive tax reform plan known as the “Blueprint.” The Blueprint would almost double the standard deduction and eliminate the deduction for state and local taxes paid, along with other itemized deductions, except the MID and the deduction for charitable contributions. The effect of this plan would be an 85 percent reduction in the benefit of the mortgage interest deduction, along with a 100 percent reduction in the property tax deduction.
Now that President Trump has endorsed most of the goals and major provisions of the Blueprint plan, including the ones that would most endanger the mortgage interest deduction, REALTORS® are on high alert that tax reform could threaten most of the tax benefits of homeownership.