Their tax cut for the wealthy bill will devastate home selling

[SHRED]

And new home construction.

Toying with the home mortgage interest deduction like this is a "non-starter" as we say in union negotiations.

No way this stands.

http://www.businessinsider.com/trump-tax-plan-home-mortgage-interest-deduction-2017-11

[Not Ruth]

1. What will be the effect on home buying

[we can do it]

2. Same.

[crazylikafox]

6. Prices will drop on houses over $500,000. This will push down value of ALL houses below that number

People will be underwater again on their mortgages. They won't be able to sell & move up. Will foreclosures start increasing again? Maybe, as people stop paying on underwater mortgages.

[MichMary]

3. Isn't it just

interest over $500,000 in mortgages? Wouldn't the interest up to $500k in your mortgage still be deductible?

[mythology]

4. In theory, but coupled with increasing the standard deduction

It's estimated that about 4% of people would use the mortgage interest rate deduction under the plan.


http://www.cnn.com/2017/11/03/politics/mortgage-deduction-tax-reform-cuts-jobs-salt-state-local-taxes/index.html

[MichMary]

8. If the standard deduction

is increased, wouldn't that offset the lack of interest rate deduction?

We bought our first house in 1983 when mortgage interest rates were extremely high--we paid 12.75%. At the end of the year you would look at your statement and realize that your equity had increased by about $1.97. Deducting your interest would make a huge difference in the taxes you paid. With rates as low as they are now, I can't imagine deducting mortgage interest would make that much of a difference.

[marylandblue]

9. It makes a huge difference in higher price markets

Also, increasing the standard deduction doesn't help anyone much, because they are eliminating the personal exemption. A married couple with 2 kids taking the standard deduction, gets a $28,000 deduction/exemption. Now they would get $24,000. Spread this news far and wide, it is being under reported.

[MichMary]

22. Yes, but

the married couple with two kids would get a $600/per child increase in tax credits, in addition to the deduction.

[mythology]

33. Not if the purpose of the deduction is to help encourage buying instead of renting

Yes it's less of a difference which is why only about 20% of people use the interest deduction, but it is definitely a thing for those people.

[PoliticAverse]

5. The bill would allow you to deduct interest on the first $500,000 in a mortgage. n/t

[MichMary]

7. On other words,

it really isn't going to affect many people, and those, probably not by a lot, right?

And, aren't people with those kinds of mortgages actually people who can afford to pay more in taxes?

My dh did some figuring and thinks this bill will be good for us--solidly middle class income, we don't itemize, etc.

(Believe me, I'm not trying to defend ANYTHING the GOP does, but just trying to see the facts in such a highly partisan climate as we live in today.)

[marylandblue]

10. Figure in the loss of the personal exemption. Still come out ahead?

[MichMary]

23. Yes

By about $324.

[MichMary]

24. The accountant's answer

I asked my dh how this would affect us specifically. This is what he answered.

The standard deduction for 2018 will be 13,000 (not the tax return we file for 2017 this coming April, but for 2018 when the tax plan will take effect)
The individual deduction for 2018 will be 4,150. The total is 21,300 for our 2018 income tax return. The Republican plan replaces that with a 24,000 deduction to be adjusted yearly by inflation (chained CPI)

We receive $324 more in deduction.

However, the capital gains tax which affects us drops to 15% from 20%, saves us a couple of hundred per year on average. The big story is the change in the brackets and the tax rates per bracket, which saves us between $1,800 and $2,000 per year in taxes. Using the $1,800 figure and the change in the capital tax rate and the small change in the deductions, our taxes will go down about $2,200 on average with the same income and capital gains I expect for 2017.

[marylandblue]

26. changing the brackets is a clever trick

Seems to make those in the 10% bracket pay more, but a lot in the 15% bracket less. For me, losing the medical deduction is a killer. I have a lot of medical expenses, add that to losing the mortgage deduction and personal exemptions, I think I will end up paying more.

[MichMary]

28. Sort of off-topic, but

can I ask what kind of health insurance you have? It might be worthwhile to move up from a silver plan to a gold one. The premium would be more, but would save on out-of-pocket medical expenses.

[marylandblue]

29. I have a very good employer sponsored plan

But we have a lot of uncovered expenses due to the nature of the services, the type of providers and having to go out of network. I max out my catastrophic limit every year, and still have to pay more than that. Just my family's bad luck.

[MichMary]

30. We also have a good plan

through dh's job, but will have to go private when he retires in December. His company used to offer retiree insurance, but they discontinued it a few years ago. He had been thinking of retiring last July, so we checked in May and the only plan that would actually be available to us was $1700/month. Dh has been keeping an eye on things and it looks like we will be paying $2200/month. (That's a silver plan.)

It will be painful to make that payment every month, but we will do it. It will mean that we will be spending considerably less at local restaurants, bookstores, yarn stores, clothing stores, movie theaters, etc.

[Not Ruth]

11. It will affect rich people who can obtain a $500k+ mortgage

But not super rich people who pay cash

[MichMary]

12. If someone can afford

a $500,000+ mortgage, do we really need to worry about them paying a little more in taxes?

I live in a relatively low cost-of-living/housing area, and can't imagine that people who would take out that kind of a loan are actually struggling to make ends meet.

[cally]

19. Think beyond your narrow life choice

Folks in California and other states do take out those types of mortgages and stretch every dollar they have to pay mortgage. Rents are even higher in these markets so sometimes it's the only choice they have. These are not mansions but small fixer uppers. In San Francisco Bay Area, you would have difficulty finding a house for $500,000.

[SHRED]

13. Rich?

[cally]

16. NO!!!! THE AVERAGE PRICE OF HOMES IN CALIFORNIA IS ABOUT THAT

and it is not just RICH PEOPLE. It will decrease home prices overall, decrease housing starts which are a major indices of a growing economy.

Plus, stimulating with tax cuts when you have full employment will cause inflation which increases interest rates and slows the economy. Still think it won't affect you.

I'm all for looking at the mortgage deduction in a thoughtful way that will not impact economy and certain areas like a sledge hammer. Major shocks to the economic system cause harm and it will not just be blue states.

[Not Ruth]

18. While that may be true of California, it is not true of the average homeowner

I do not think that I know a single person or couple with a $500K+ mortgage. In addition, few people mortgage 100% of their home price.

[cally]

20. Not true where I live. Common to mortgage entire home price

plus bring in other adults to pay rent and help pay the mortgage.

[Not Ruth]

21. Fascinating real estate market, most of the country is not like that

[MichMary]

25. Sounds like

decreased home prices in your area wouldn't be a bad thing.

[Cicada]

14. How many mortgages exceed $500,000? Well many in Ca, NY, Seattle, few in Texas, Kansas etc

So it will screw home builders in a few Blue states mainly.

[SHRED]

15. It'll affect much more than builders

In fact it will slow economic growth across many sectors.

[cally]

17. Umm, those blue states you disparage are a big part of economic growth, taxes, etc.

Don't be so narrow.

[Cicada]

31. This rule will have minimal impact

For new purchases the selling price will be lower to reflect the (maximum) tax hike of $7500 per year ( for a mortgage loan of one million dollars). The seller of a used home will have a somewhat lower windfall. New homes will still be built but the price of the land will be reduced to reflect the reduced tax break. Interest on the first 500,000 of mortgage is not limited, just interest on the mortgage amount over 500,000 up to the current limit of one million.

California, Seattle, New York are strong economies which can absorb this without very much harm.

The limit on deducting state income tax will have vastly more harm.

Personally I think we should ban the deduction for home mortgage on new mortgages. That will just cause the price of land to decline by the tax savings from the mortgage. The price for construction will go down only a trivial amount. There is now no real savings from the deduction for home mortgage. The tax savings just causes the cost of the land to rise in equal amount.

People will pay X dollars, after tax savings, for the home. If the home price is 700,000 and the present value of the tax savings is $100,000 then the sales price of the home without the ability to deduct mortgage interest will fall to $600,000. The net cost to the buyer will be $600,000 with or without deductibility of home mortgage interest.

[marybourg]

27. What happens in blue states affects purple states too.

If Californians have trouble selling their $500,000+ homes, they won't be buying that new retirement home in AZ. Same for New Yorkers and FL.

[Cicada]

32. I live in CA, Our economy is strong enough to absorb this

Most selling their $500,000 plus homes have 250,000 profits. They can sell for 475,000 instead and still buy a fabulous home in wonderful Tucson for 300,000

[Achilleaze]

34. Home owners' equity will pay for corporate tax cuts

republicans are plotting a Royal Ream-job on Americans with their twisted tax bullshit...

“The corporations are getting a major tax cut, and it’s getting paid for by the equity in American homes,” said Jerry Howard, chief executive of the National association of Home builders.

“The Republicans have always claimed that they don’t want to pick winners and losers in the economy,” he said. "They are clearly picking large corporations over small businesses, and they are clearly picking wealthy Americans over the middle class.”

– Laura Kosisto, Christina Rexrode, and Chris Kirkham, “Tax Plan Cuts Incentives to Homeowners,” Wall Street Journal, November 3, 2017.