Thursday, the Senate released its tax reform bill which since received a mixed response from the housing industry.
One of the biggest changes from the House tax reform bill is that the Senate’s version would leave the mortgage interest deduction intact at its current cap of $1 million. The House tax reform bill would cut the MID in half to a cap of $500,000.
But despite leaving the MID intact, the Senate’s bill has still received mixed reactions from the housing industry. One expert said this is hardly a relief as the Senate’s bill would still double the current standard tax deduction.
“While the Senate’s proposed tax bill makes the MID whole on paper by raising the cap back to $1 million in deductible interest, champions of the deduction won’t exactly be breathing a sigh of relief,” Zillow senior economist Skylar Olsen said. “Like the House bill we saw last week, the Senate’s tax bill still proposes doubling the standard deduction, and the Senate wants to completely remove the state and local property tax deduction.”
“Under the Senate bill, Zillow’s analysis shows that in most places, even fewer households would itemize deductions, meaning an even smaller sliver of homeowners would benefit from the MID, rendering the MID a much more niche tax benefit,” Olsen said. “That is sure to cause a stir among industries that rely on widespread use of the MID.”
The National Association of Realtors, one of the most vocal defenders of the mortgage interest deduction, said just keeping the mortgage interest deduction intact isn’t good enough.
“While we are still reviewing the outlines of this proposal, we are watching closely for changes to current law that might leave middle-class homeowners, and homeownership broadly, in a worse place than it is today,” NAR President Elizabeth Mendenhall said.
“We’ve already seen that a near-doubling of the standard deduction, combined with the elimination of other deductions like the state-and-local tax deduction, can turn the American Dream into a nightmare for families, as the rug is pulled out from under them,” Mendenhall said. “Simply preserving the mortgage interest deduction in name only isn’t enough to protect homeownership.”
However, not everyone is opposed to the Senate’s new reform bill. The National Association of Home Builders explained the Senate’s bill is an improvement on the reform bill being discussed in the House.
“While NAHB still opposes the current House tax reform bill, the Senate version represents a positive development,” NAHB Chairman Granger MacDonald said. “However, though the Senate bill provides meaningful tax relief for small businesses and keeps the complete Low-Income Housing Tax Credit program in place, we still believe that maintaining an effective homeownership tax benefit is vitally important. NAHB will continue to work with lawmakers to achieve this goal as the legislative process moves forward.”