Tax bill is a mixed bag for new homeowners as deduction is slashed

0
41
Rep. Kevin Brady


Who uses the mortgage interest deduction, by income

0 to $50,000 2.32 million $1.11 billion
$50,000 to $100,000 9.77 million $9.19 billion
$100,000 to $200,000 14.6 million $24.85 billion
$200,000 & up 7.18 million $29.78 billion
Totals: 33.87 million $64.93 billion

Source: 2016 data from Joint Committee on Taxation report. *Income ranges include AGI plus variety of untaxed items (i.e., employer contributions to health care plan, nontaxable social security benefits, etc.)

While the plan includes a provision to allow a continued deductions for state and local property taxes paid, the bill caps that at $10,000.

“The bill eviscerates existing housing tax benefits by drastically reducing the number of home owners who can take advantage of mortgage interest and property tax incentives,” said Granger MacDonald, chairman of the National Association of Home Builders, in a statement.

The biggest benefits of the mortgage interest deduction tend to go to higher-income taxpayers. The 7.18 million filers with incomes of $200,000 or more who claim the deduction will reduce their taxable income by an aggregate $29.78 billion this year, according to recent estimates from the congressional Joint Committee on Taxation.

In comparison, the 14.6 million filers with incomes of $100,000 to $200,000 will save less: $24.85 billion. Filers with incomes below that have even smaller tax savings this year.

The legislation also would change how often homeowners can avoid paying taxes on profits from the sale of their home.

Right now, you generally can exclude up to $250,000 in gains ($500,000 for married couples who file a joint tax return) on the sale of your house as long as you haven’t used the exclusion in the last two years. The bill changes that to five years.

More from Your Money, Your Future:

Now is the time to make these six year-end tax moves

With stocks at record highs, maybe it’s time to give some assets away

Pick the wrong Medicare drug plan and the cost will shock you



Original Source