Tax Reform Changes Might Make Mortgage Interest Deduction A Moot Point
Tax Reform Changes Might Make Mortgage Interest Deduction A Moot Point
With discussions in Congress already underway to dramatically change the U.S. Tax Code, many existing and potential homebuyers are curious as to exactly what impact possible changes might have on itemizing or deducting costs like Mortgage Interest, City/State Taxes and Property Taxes.
Last week, Rep. Kevin Brady (R-Texas), the chairman of the tax-writing House Ways & Means Committee, told a gathering of National Association of Realtors (NAR) 2017 Federal Policy Conference in Washington, to stay engaged in the process. Following are some of the issues discussed in the meeting…………………
“"We have a historic opportunity – the first time in 30 years – to completely reform the tax law," Rep. Kevin Brady (R-Texas) told hundreds of Realtors who were in Washington on Feb. 8 for the conference that NAR holds annually to educate members on the issues expected to dominate the Washington agenda for the year.
In 2017, NAR expects tax reform to be high on the list of priorities taken up by Congress and the new administration. Reform of the secondary mortgage market – Fannie Mae and Freddie Mac – is also on the agenda later in the year, along with flood insurance reauthorization and reform.
Brady introduced Realtors to a tax reform blueprint that House Republicans are working on. While it will probably go through changes, it stands a good chance of being the main vehicle for any tax reform effort that gets taken up in the House.
The blueprint, as first proposed, would broaden the tax base by condensing tax brackets from seven to three, with tax rates of 33, 25 and 12 percent, respectively. It would also increase the standard deduction to almost twice its current level, and it would eliminate many itemized deductions, including those for state and local taxes.
The mortgage interest deduction and the deduction for charitable contributions would remain, but because of the higher standard deduction, it's likely that most homeowners would no longer have an incentive to itemize and save more money by taking the standard deduction, which concerns NAR.
Real estate investments
On the commercial side, the blueprint doesn't specifically repeal 1031 like-kind exchanges. However, Brady admitted that the committee is considering eliminating the provision.
The blueprint would allow owners to deduct 100 percent of the cost of new business assets, including buildings (but not land) in the first year of ownership. Brady along with Rep. Peter Roskam (R-Ill.), chair of the tax policy subcommittee of the Ways & Means Committee, said the accelerated expensing could go a long way to offsetting the 1031 exchange as an investment incentive, but they wanted to hear from Realtors more about their concerns.
"We haven't made our decisions yet," said Roskam. "We're listening."
Maintaining 1031 exchanges is a top priority for NAR. In the question and answer period, a Realtor said that two-thirds of commercial investment is spurred directly or indirectly by the exchanges.
Fannie Mae, Freddie Mac reform
At the conference, Realtors also heard about the prospects for secondary mortgage market reform. The big ideological debate on that issue centers around whether the federal government should continue to back mortgages sold in the secondary market.
A staff aide at the conference said legislation has been introduced to help make the debate easier by allowing more private sector parties to buy the risk held by Fannie Mae and Freddie Mac. Other legislation would touch on a common securitization platform Fannie and Freddie are working on, which would allow private insurers to get into the market more.
"These are things we can agree on and make the decision [about federal backing] easier once we get there," he said.
NAR wants to see the federal government stay in the market to ensure the viability of affordable, 30-year, fixed-rate mortgages and also ensure mortgages are available in bad times as well as good.
On flood insurance, congressional aides said many lawmakers want to avoid the kind of short-term reauthorizations of the National Flood Insurance Program that the market saw several years ago. NAR supports early reauthorization of the program, which expires later this year.”
In concert with our preferred lending partner, Caliber Home Loans, Inc., I am committed to keeping abreast of all of the discussions and potential impacts to our market, and will be happy to share what I know when you call me at 239-273-4006. You can also email me your questions at Fay@move2naplesnow.com. Also, take the time to visit my website, movetonaplesnow.com where you can read other blogs and learn about my VIP Buyer Program. Fay Mlinarich, PA., Premiere Plus Realty.
Author:Fay Bamond Phone: 239-273-4006 Dated: February 14th 2017 Views: 81 About Fay: Fay Bamond, PA, Broker Associate, provides buyers and sellers in-depth local knowledge, technologica...
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