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Homeownership is the foundation of the American economy, HUD Secretary Ben Carson said at a forum on June 1.
Unfortunately, that sentiment is not reflected in tax reform proposals being pushed in Washington today.
On June 24, Congressional Republicans released a of comprehensive tax reform “blueprint” that would penalize most homeowners with a tax hike and remove incentives to homeownership that have existed for more than a century.
Realtors® are on high alert, focused on defeating any policy changes that would hurt homeowners.
“This proposal recommends a backdoor elimination of the mortgage interest deduction for all but the top 5 percent who would still itemize their deductions,” said National Association of Realtors® (NAR) President William E. Brown.
No bill has been introduced yet, but the consulting firm PricewaterhouseCoopers (PWC), commissioned by NAR, evaluated a tax reform plan modeled on the “blueprint.”
PWC’s study concluded that home-owning families with incomes between $50,000 and $200,000 would face average tax hikes of $815 in the year after enactment, while non-homeowners in the same income range would enjoy average annual tax cuts of $516. Further, home prices nationwide in the short run would fall by 10.2 percent.
The blueprint recommends cutting all but two deductions — for mortgage interest and charitable deductions — and doubling the standard deduction. These changes would make the mortgage interest deduction (MID) useless for nearly all middle-income homeowners.
Homeowners nationwide already pay 83 percent of all federal income taxes; they would pay an even bigger share under the proposed reform.
These changes would make the
mortgage interest deduction useless
for nearly all middle-income homeowners
NAR has released an interactive map tool showing how much homeowners currently benefit from the MID, sorted by congressional district. For example, in Pennsylvania’s 7th Congressional District — which includes portions of Delaware, Chester, Montgomery, Berks and Lancaster counties — 59 percent of homeowners claim the MID in 2015, cutting an average of $8,427 from their taxable income in 2015.
At that HUD forum in June, kicking off National Homeownership Month, Sec. Carson also said: "The importance of homeownership is apparent to all of us … security, certainty, safety, wealth creation, a path forward, self-sufficiency, a place to live with loved ones, to raise our families, the location of our neighborhood.”
Realtors® agree. And we support sensible tax reform, but we will fight hard against any policy that would harm homeowners.