Home Sales Untouched So Far by Mortgage Deduction Loss โ˜˜ Hoey Team โ˜˜ eXp Realty

Dated: August 17 2019

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While fewer middle-class homeowners can now claim the mortgage interest deduction due to tax reform, it doesn’t seem to have hurt the current real estate market.

NEW YORK – Even though the Trump administration’s tax overhaul indirectly reduced the use of the mortgage-interest deduction by middle-class families by nearly doubling the standard deduction, people still buy and sell homes.

The IRS found that about 1 in 5 taxpayers claimed the deduction in 2018; this year, that number fell to less than 1 in 10. For families earning less than $100,000, the decline was even more stark.

The benefit is largely used by high-income earners, with the 2017 law capping the maximum value of new mortgage debt eligible for the deduction at $750,000, down from $1 million.

With home sales continuing at a healthy pace, critics of the mortgage-interest deduction say it should be further reformed because it distorts the housing market, encouraging homeowners to buy the biggest home possible even if they cannot afford the costs. But the real estate industry said scrapping the deduction could undermine the value of what is, for most American families, their most important asset.

In the debate over the tax law in 2017, the industry warned that the legislation could cause house prices to fall 10% or more in some parts of the country. Price growth has cooled in many markets, including New York and Seattle, but not nearly as much as the most alarming estimates suggested, and not in a pattern that suggests the loss of the deduction was a primary factor.

Places where a large share of middle-class taxpayers who lost the mortgage-interest deduction, for example, have not seen any meaningful difference in price increases from less-affected areas, according to a New York Times analysis of data from Zillow.

Source: The New York Times (08/04/19) Tankersley, Jim; Casselman, Ben

Article content from Florida Realtor Magazine

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