Stay up to date on current News & Issues.
Mail-in ballots due by Tuesday, June 2; postmarks don’t matter
County resumes some in-person services
Phoenixville considers creation of Neighborhood Improvement District
County council to vote on market-value assessment ordinance
County to place secure ballot boxes for upcoming primary
Sale of South Philadelphia refinery about to close
The National Association of Realtors® engaged KSE Focus to analyze the impact of the mortgage interest and real estate tax deductions in all 50 states and the District of Columbia.
The results show that Pennsylvania homeowners would be hit hard if these deductions are removed or rendered useless by tax reform legislation currently being considered.
Here are the results of KSE's analysis:
Facts on the Mortgage Interest and Real Estate Tax Deductions in Pennsylvania
Of the approximately 3,404,000 owner-occupied houses in Pennsylvania in 2014, 2,062,000 or 61% had a mortgage.
In 2014, 1,354,200 taxpayers in Pennsylvania claimed a deduction for mortgage interest (MID). The total amount deducted was $9,863,101,000. This means that the average taxpayer claiming the MID subtracted $7,300 from taxable income in 2014 as a result of the MID.
At a marginal rate of 25 percent1 , this means that the average taxpayer saved $1,820 in taxes as a result of the MID. The total tax savings from the MID in Pennsylvania in 2014 was $2,465,775,250.
In 2014, 1,592,700 taxpayers in Pennsylvania claimed a deduction for real estate taxes. The total amount deducted was $8,005,489,000. This means that the average taxpayer claiming the real estate tax deduction subtracted $5,050 from taxable income in 2014.
At a marginal rate of 25 percent2 , this means that the average taxpayer saved $1,260 in taxes as a result of the real estate tax deduction. The total savings from the real estate tax deduction in Pennsylvania in 2014 was $2,001,372,250.
If the MID and real estate tax deductions were eliminated, the loss would not be a one-year event; homeowners lose out on these potential savings each and every year. The present value3 of these lost savings could total $114,542,243,600. The value of all owner-occupied real estate in Pennsylvania in 2014 was $697,742,720,400. If the lost tax savings are fully capitalized into the price of houses, the average decline in value in Pennsylvania could be 16%. From the individual perspective, the median priced home in Pennsylvania in 2014 was $160,800. A decline in value as projected could mean a loss in home value of $26,400 for the typical home owner.
1 Marginal rates range from 10 to 35 percent.
3 Present value calculation assumes 3.9 percent discount rate and 1000 year time horizon.
Sources for the data above include: Internal Revenue Service 2014, American Community Survey 2014, National Association of Realtors® 2014; All calculations are by the National Association of Realtors® Research Division, July 2017.
Let your elected officials know how you feel about tax reform that harms homeowners by answering NAR's Call For Action.