Up until now, the elimination of the mortgage interest deduction has been considered off limits when discussing tax reforms. The third rail, don’t touch it, but that has changed. Elimination is a real possibility now on the table.
In fact, according to Gary Cohn, National Economic Council Director, almost everything, including the mortgage interest deduction, is in play when it comes to tax reform. This despite promises made during his campaign by President Trump to leave it alone.
Republicans need to come up with ways to pay for their tax reforms and eliminating this deduction, along with the deduction for state and local real estate taxes, could do the trick.
Needless to say, the Realtor community is up in arms, and they are a powerful lobby. The battle lines are drawn.
The key could be in the proposed doubling of the standard deductions. In doing so, for most, he mortgage and state and local real estate deductions would be meaningless.
Such deductions would only benefit the very wealthy, who would still itemize (and we know, no one cares about them).
- Could it be that the mortgage interest deduction has outlived its usefulness?
- Will people still buy homes if they can no longer deduct the related mortgage interest and taxes?
- Might the increased standard deduction leave consumers with more disposable income to use to buy homes?
- Are the mortgage and tax deductions still the main motivator for buying a home?
- What effects will elimination of these deductions have on housing, Realtors, Builders and mortgage lenders?
If you step back and look at it, elimination of these long standing deductions may have minimal effect on the housing markets.
People will still buy homes at all levels because they want to own their piece of the rock. They want to become part of a community providing them a stable environment to raise a family, with the added benefit of a long term investment they can use and enjoy while earning equity.
Many already do it today knowing they don’t itemize to take advantage of these deductions. They don’t make enough money to do so, but they buy anyway.
Personally, I’m a fan of these deductions. I believe they do motivate some to buy instead of rent. But, then again, people tell me I’m a little old fashion. Maybe…
How about we settle the issue once and for all and go to a flat tax?