President’s Tax Reform Plan Would Actually Increase Taxes For Most Homeowners
The Trump Administration unveiled the outline of a tax reform plan at the end of April. Its goals are a simpler, more growth-oriented tax system, and lower taxes on American families.
The National Association of REALTORS® (NAR) has studied the outline and determined that while the tax reform plan is well-intentioned, it misses the mark by leaving too much of the tax burden on the shoulders of homeowners.
The study, known as the “Impact of Tax Reform Options on Owner-Occupied Housing,” highlights a pair of major concerns for homeowners.
- Homeowners with adjusted gross incomes between $50,000 and $200,000 would see an average annual tax increase of $815;
- Home values could fall by more than 10 percent in the short run following enactment.
“Tax reform and lower rates are worthy goals, but only if we can achieve them in a fiscally responsible way,” said NAR president William E. Brown. “Homeowners put their hard-earned money on the line to make an investment in themselves and their communities and it’s on them to protect that investment.
“Common sense says owning a home isn’t the same as renting one, and America’s tax code shouldn’t treat those activities the same either.”
Brown added that between 80 and 90 percent of all personal federal income taxes in the United States are paid by homeowners. Without the incentives for homeownership, those figures could rise even higher.
“Targeted tax incentives are in place to help people [achieve their goals],” Brown said. “The mortgage interest deduction and the state and local tax deduction make homeownership more affordable while 1031 like-kind exchanges help investors keep inventory on the market and money flowing to local communities.”
Brown pointed out that those tax incentives are at risk with the tax outline released by the White House. Homeowners could be facing a stark decrease in their home’s value and sharply higher taxes if tax reform cancels out the tax incentives they depend upon.
REALTORS® support tax reform and are encouraged by the White House and Congress’ commitment to needed changes, such as reduced tax rates and simplification. However, they are staunch in their belief that eliminating homeownership incentives is the wrong approach.
“A tax reform proposal that hikes taxes for homeowners is a raw deal,” Brown said. “Leaders in Washington who are driving tax reform have shown every indication that they have the best of intentions and we’re hopeful they’ll consider our study as this process plays out.”