Will Mortgage Interest Deduction be Around in 2018?
The mortgage interest deduction is again at risk as the House tax plan looks to limit this tax benefit. Is that a bad thing?
Mortgage Interest Deduction Hot Button
It’s hard to know who to trust when you hear politicians debate about the tax cut plans. It’s difficult to research the topic without being bombarded by back and forth from both sides of the isle.
As of the writing of this article, the House has passed their version of the tax cut bill, with the Senate’s version expected any day now. The House tax cut proposal includes pretty major changes to the mortgage interest deduction, and real estate in general.
The one thing that everybody does seems to agree on, the mortgage interest deduction is a part of the conversation. Reactions range from “the sky is falling” doom and gloom, to far fewer saying that it’s really not a big deal.
The mortgage interest deduction has long been a sacred topic that is often talked about, but rarely affected. The only proposal we have so far has this deduction square in it’s crosshairs.
Is this necessarily a bad thing? It seems like it really just depends on who you ask.
The purpose of this article is to try to present you with some of the basics of each of these arguments, and let you decide for yourself whether or not this is something you should be concerned about. Of course, my opinion my seep in there a bit too.
Tax Plan Cuts Mortgage Deduction in Half
That is part of the the actual headline as it appeared online online, on November 2nd, 2017. I found this article to be more interested in click bait than they were about impartial reporting. You can decide for your self.
The facts are, if you purchase a new home (new to you), and your mortgage is greater than $500,000, your interest deduction is being capped. The current mortgage interest deduction cap is 1 million dollars.
Will it Affect Me?
The appropriate question at this point becomes, will it affect me? This is a very interesting conversation, and many people have different opinions about this.
The fact is, it only affects those buying in areas where a mortgage of greater than $500,000 is required to buy a new home. What headline grabbing articles don’t like to tell you is the rest of the story.
I found this to be an interesting tax fact as it appeared in news coverage of the passing of the House tax cut plan.
The plan also nearly doubles the standard deduction, meaning fewer taxpayers would itemize and take the mortgage interest deduction.
Currently, about 21 percent of filers take the mortgage deduction, but under the new framework only about 4 percent would, according to recent estimates from the Tax Policy Center.
You don’t hear much about this side of the conversation. Currently, only 21% of tax filers use the deduction, and all but 4% would need to after doubling the standard deduction?
Is This The Truth?
I don’t know about you, but I keep hearing that this tax cut is going to destroy the housing market in 2018. I might be missing something, but this doesn’t sounds like a main-stream problem.
Capping the mortgage interest deduction is absolutely going to affect home owners in high cost States all over the Country. I hope that the details of the tax plan offer other incentives to balance the losses of this deduction.
The overwhelming majority of homeowners in 2018 will not be affected by any changes to the mortgage interest deduction.
The Senate plan does not reduce the mortgage interest deduction cap from 1 million to $500k. There are many other aspects of these tax proposals that will affect American tax payers in many ways. That’s for the professionals to sort out.
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