A sweeping overhaul of the tax code unveiled by House Republicans on Thursday would cap the deduction for property taxes at $10,000 and preserve the mortgage interest deduction only for existing mortgages and new purchases with loans of $500,000 or less.
Those changes will amount to a tax increase on high-income taxpayers with pricey homes, even if they get lower income tax rates.
We must reverse the decline in California’s homeownership rate. For over 100 years Congress has incentivized home-ownership with the tax code; currently through the mortgage interest deduction. Any effort at reforming the tax code should maintain and prioritize this incentive. The current proposal only pays lip service to incentivizing home-ownership. The proposed changes will result in only top earners itemizing their deductions. Therefore, the vast majority of people will no longer receive any tax incentive to purchase a home. So, while the proposal keeps the mortgage interest deduction, the incentive effect of the deduction for Americans to become homeowners disappears.
It weakens the mortgage interest deduction.
- It caps the mortgage interest deduction to the interest on a mortgage principle of $500,000.
- Homeowners would no longer be able to deduct the interest they pay on home equity loans.
- The deductibility would be eliminated for second homes and limited to loans on a family’s primary residence.
Families build wealth through home-ownership. According to a report by the Federal Reserve in 2016, homeowners amassed wealth at a greater rate than renters. Renters had a median net worth of $5,200 while homeowners had a net worth of $231,400.
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