By Rich Rodenburg, Nebraska Home Sales REALTOR
Special thanks to articles from The National Association of REALTORS (NAR).
The U.S. House and Senate have passed sweeping tax reform legislation that is expected to have a major impact on housing markets, according to NAR.
The bill is an improvement for homeowners when compared to earlier House and Senate versions, because it makes several changes NAR sought. However the structure of the bill continues to raise concerns. The NAR will look for legislative opportunities next year, as they arise, to improve the law.
In general, the bill lowers tax rates and almost doubles the standard deduction while making itemized deductions less attractive to use. The bill keeps the mortgage interest deduction in place, for both first and second homes, with a mortgage limit of $750,000 for each, down from $1 million. The bill also keeps deductions in place for state and local income taxes and property taxes, but limits the two deductions together to $10,000. The limitations on these and other deductions means many homeowners who itemize today will find it more attractive to take the newly increased standard deduction, although that deduction is less valuable than it initially appears because the bill also eliminates the personal and dependency exemptions.
“The new tax regime will fundamentally alter the benefits of homeownership by nullifying incentives for individuals and families while keeping those incentives in place for large institutional investors. That should concern any middle-class family looking to claim their piece of the American dream,” The National Association of Realtors claims.
The bill keeps current law in place on the capital gains exemption on the sale of a home. The earlier versions of the bill would have made that exemption harder to take and added limits on higher-income households. In the end, those provisions were removed.
The bill keeps current law in place for many provisions of importance to commercial real estate, including 1031 tax-deferred exchanges.
Although the bill is improved compared to earlier versions, we, as Realtors, will stay engaged and will seek to make further improvements for homeowners. We still have some hard work ahead of us to protect current home owners and to help others realize the American dream of owning their home.