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Congress to work on Tax Reform; Mortgage Interest Deduction threatened
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Seeking a major victory on campaign promises, Congressional Republicans are now focused on tax reform after health care reform failed passage. The mortgage interest deduction may be considered for elimination. C.A.R. and N.A.R. both acknowledge the complexity of federal tax law and seek to assure that tax reforms support the goals of homeownership, freedom to buy, maintain, and sell real estate.
While no bills have been put forward by the chairman of the tax committees in the Senate or the House, a "Blue Print" was put forward last summer that would severely reduce the homeownership incentive of the MID by increasing the standard deduction. The proposal also would eliminate the deduction of state and local property and income taxes, as well as the elimination of the 1031 exchange.
The path forward to tax reform is still quite cloudy, both as to timing and what might be successfully brought to the finish line. However, with policymakers of all stripes expressing a willingness to simplify the tax law and to broaden the base and lower the tax rate, a very real possibility exists that common ground on tax reform can be found. Along with this possibility is the danger that the tax incentives for owning a home could be diminished for the majority of Americans, and that vital provisions for commercial real estate could be repealed or limited in order to “pay for” lowering the tax rates.
(Source: California Association of Realtors®)