Senate lawmakers could soon put their version of tax reform to a vote, as REALTORS® continue to mobilize against the bill. Similar to the House’s tax plan, which passed two weeks ago, the Senate bill would erase the distinction between renting and owning a home in the tax code and could lead to drop in home values of more than 10 percent on average.
As with the House bill, the Senate legislation includes provisions that sound good but could lead to higher tax bills for many middle-income homeowners. These seemingly positive provisions include lower tax rates and an increase in the standard deduction. But for the majority of tax filers who own their home, the changes would remove the incentive value of the mortgage interest and property tax deductions. This value is built in to the price of all homes, so taking them away would drop the value of homes everywhere.
Another less-touted change would reduce the positive effect of a higher standard deduction. “What a lot of people don’t understand is that the personal and dependency exemptions would go away, so while it seems to be a big boost, much of the gain is being taken away,” Evan Liddiard, senior legislative policy representative with the National Association of REALTORS®, said in a Facebook Live event NAR hosted last week to explain the House and Senate versions of tax reform.
To educate lawmakers about their concerns, several dozen REALTORS® flew to Washington in the days leading up to the tax reform votes in the House and the Senate Finance Committee. Their message was that while REALTORS® support tax reform, the versions being considered in Congress were good for corporations—which would see a big cut in their taxes—but bad for homeowners.