At this week's office meeting, a colleague reported on what happened at the recent NAR meeting with respect to tax reform. And if I had expected a lower tax bill, it doesn't look too promising for me or most other hone owners.
Originally I thougth, great, they are keeping the mortgage tax deduction. But it's more complicated.
Right now, the Republicans in Congress are working feverishly to get a tax reform bill to President Trump. They want to be able to go home to their districts for Thanksgiving with news that they've accomplished something.
But wait! What are they trying to accomplish?
People who don't own a home and who file a short form tax return may indeed get a tax break. But sadly, out clients - anyone who owns a homes - probably will not.
Here are some of the concerns listed in the National Association of Realtors talking points:
- The bill does keep the mortgage interest deduction - sort of. The amount of mortgage was lowered, however to $500,000, and it only applies to primary residences. No second homes.
- The standard deduction will be increased for each wage earner, which will make it more beneficial to forget the mortgage deduction and standard deduction.
- Capital gains tax deduction ($250,000 for single filers and $500,000 for couples) are being eliminated for people who have not resided in their home for at least 5 out of the last 8 years. This will especially impact military families who move frequently.
- The capital gains deduction in being phased out for single filers who earn more than $250,000 per year and for couples earning more than $500,000. So people like me who bought in 1983 for $126,000 would have no incentive to sell a home now worth over a million dollars. That'll help increase inventory - not!
- Interest on student loans would no longer be deductible.
- State and local taxes, be they sales taxes or real property taxes, cannot be deducted on your federal return.
- They are cutting out the deduction for moving expenses should you be transferred from one city to another.
- No more medical expense deduction - like insurance costs for self-employed people in addition to large medical expenses not covered by insurance.
- No more casualty loss deduction, so if you get hit by a hurricane, tornado or forest fire, any losses over and above what your insurance covers will not be deductible.
NAR and the National Association of Home Builders have teamed up to push back on these changes, which will be felt keenly by many of our clients. But where is the National Association of Homeowners in this battle?
Oh, wait. there is no National Association of Homeowners!
Bottom line, I think that we should not depend entirely on NAR to educate the public. We need to do that. Many brokerages in this area are sending emails and mailings to clients asking them to contact their congressional representative - except here in Washington, DC our citizens don't have voting representation on Capitol Hill!
You can answer NAR's Call to Action, Please, please send your congressperson and Senators letters or emails (your own words are better than the canned version NAR provides, but use it as guidance). If they want tax reform, the idea is to do it competently, not just quickly!
And even more important, you can share this information with current and past clients so they can take action, too.
This is not just an important NAR issue, but also a crucial consumer issue!