The President and House GOP leaders are both working on changes to tax laws. The changes currently discussed in the House include a reduction in income tax rates but an elimination of some very popular tax deductions to offset those losses. Among the targeted tax deductions are a few that specifically affect home owners.
Real estate property tax deduction
Currently on the chopping block are tax deductions for real estate property taxes. This deduction allows homeowners to claim the amount paid for property taxes for the entire calendar year. Since assessed values and property tax rates vary by city/town, the deduction amount differs for all homeowners. When itemized, this tax deduction reduces the taxable income for homeowners. Therefore, its elimination will have a negative impact.
Mortgage interest tax deduction
There’s both good news and bad news when it comes to this homeowner tax deduction. The good news is that the deduction is unlikely to be entirely cut given the amount of support and huge impact it could have. The bad news is, changes are expected to specifically target owners of high priced homes. There’s no news yet on what the benchmark would be on a high-priced home.
What this means for homeowners
It’s too early to tell exactly how much these changes will impact the typical homeowner. Since tax rates would be decreased, could that offset the increase in tax liability from eliminating homeownership tax deductions? This is something that every homeowner will want to pay attention to as additional details are released.
Should you buy a home
Even if the tax benefits of home ownership are reduced to some extent by changes to the tax law, there are still many other benefits to owning a home. With home prices on the rise, the opportunity to build equity is always a significant factor. Buying during an improving market can actually shorten the time it takes to build equity (compared to buying during a declining market). When you compare the financial costs and potential upside to owning versus renting, owning is always the clear the choice.
By Suzanne Plewes, RE/MAX Alliance Loveland
Suzanne Plewes is a broker associate at RE/MAX Alliance. Write to 750 W. Eisenhower Blvd., Loveland, CO 80537, call 970.290.0373 or e-mail firstname.lastname@example.org.