The National Association of Realtors is warning House Republicans leaders that their tax reform plan would marginalize two long-standing tax incentives for owning a home, which could hurt the housing market.
The “decimation of the mortgage interest deduction and real property tax deductions would very likely cause a significant plunge in the value of all houses,” NAR president William Brown wrote in a letter sent Dec. 16. “At a time when the housing sector has not fully recovered from the thrashing it took during the Great Recession, this drop, even if temporary, could be calamitous.”
The House Republican Tax Reform Blueprint unveiled June 24 doesn’t repeal the federal mortgage interest deduction outright, but by doubling the standard deduction, it would mean most people would no longer receive a tax benefit for their mortgage.
The GOP plan does call for a repeal of the deduction for state and local taxes, however.
That is causing concerns to the housing lobby because they view these deductions as incentives that draw homebuyers, particularly first-timers, to the closing table.
This would “cripple the incentives for owning a home for all but the most affluent taxpayers,” the Realtors warn. If approved by Congress, “millions of homeowners could again wake up to learn that the value of their largest financial asset has dived below the amount of debt that is owed on it.”
Republican leaders are expected to make tax reform a priority next year.
The deductions for mortgage interest and property taxes have been a “feature of our tax system for over a century,” the NAR letter says. “Suddenly removing them could jar the economy and have many unintended financial and societal consequences.”