Republicans are releasing an outline of their new tax-reform plan this week, hoping to pass the bill before the end of the year. The GOP’s plan would reportedly double the standard deduction. The chairman of the House Ways and Means Committee noted that the plan will offer specific numbers that include “the lowest rates on business in modern history.”
There is concern from members of the real estate and nonprofit industries that doubling the standard deduction would reduce the number of people who currently itemize their deductions. And in turn the use of tax breaks for home ownership and donating to charities would decrease drastically. Not having that incentive would negatively impact real estate industry and charitable giving.
The National Association of Homebuilders made a decision to oppose the GOP plan after top Republicans told them they wouldn’t replace the deductions, or give credit for property taxes.
“It marginalizes the mortgage interest deduction,” said J.P. Delmore, assistant vice president of government affairs at the NAHB. “We’d see the effect where a small number of homeowners would benefit, and that’s not the direction anyone is looking to go with tax reform.”
The National Association of Realtors (NAR) did a study about the impact of elements very similar to a 2016 version off the GOP’s tax plan. They discovered that if this plan went into effect, home values would fall by more than 10.2% on average.
“This is an emerging issue [lawmakers] don’t intend to create,” Delmore said. “But we hope there’s an opportunity to find a solution so that homeowners have a meaningful tax incentive that doesn’t involve being marginalized and benefiting only the wealthy.”
Regardless of the outcome, we are in for some interesting and somewhat confusing changes to tax reform.