Homeowners and real estate professionals may take a gruesome hit in their tax breaks if the GOP successfully implements their new plan to pay for their tax reform plan.
If they did go through with this, they would be breaking a Trump administration promise that said it would “protect the homeownership … deductions.” According to Politico, multiple sources have said that the cap on mortgage interest deduction could be dropped in the tax reform.
Making this decision would put a hiccup in his relationship with one of Trump’s major supporters from his campaign. During said campaign, Trump won a straw poll from the National Association of Realtors during their annual meeting last year. With the sudden change of paths, Trump is risking his healthy relationship with them.
The topic of tax reform change through mortgage adjustment came during a White House roundtable meeting. In the meeting, National Economic Council Director Gary Cohn led the meeting with the assistance of his lead deputy Shahira Knight. Cohn, a main decision-maker for the tax reform, did previously tell Congress that most things would stay on the table to make the tax reform happen. One of the attendees stated how they weren’t shying away from changes:
“They’re willing to ruffle some feathers. Everything was on the table.”
The attendee continued to say that those changes included capping the deduction that was originally promised by the Trump administration to be preserved. But despite the new ideas thrown around, nothing has been set in stone or finalized. However, losing the cap on the interest deduction could help offset tax cuts for both the individual and businesses.
The idea of this type of change hasn’t been successful with the conservatives who believe it’s inefficient and benefits wealthier people than the working class. However, it will help homeowners in higher end areas where real estate continues to grow. The negative view from conservatives combined with the White House looking into reductions has amassed concerns for real estate industries like the National Association of Realtors. Their President, William Brown released the following statement of his concern:
“[L]imiting the mortgage interest deduction amounts to a de facto tax increase on current or future homeowners while putting homeownership further out of reach for prospective buyers. We would have strong objections over any effort to further cap or limit the deductibility of mortgage interest.”
One of the only ways this deduction could work is if they successfully doubled the standard deduction which was a goal stated by House Speaker Paul Ryan. NAR released a statement in association with Trump’s tax goals that described this:
“By doubling the standard deduction and repealing the state and local tax deduction, [Trump’s] plan would effectively nullify the current tax benefits of owning a home for the vast majority of tax filers.”