If you are a homeowner, and if you have a mortgage, the proposed tax changes will have an effect on you. If you don’t have a mortgage, good for you. But you may want to pass this info on to a friend or relative who does.
Currently, homeowners can deduct up to $1 million in mortgage interest from their income. Additionally, up to $100,000 in home equity line interest is also deductable. The new proposed tax plan would not remove this deduction. But the change that will affect many is the removal of state and local tax deductions. Combining these deductions is what, for many of us, puts us over the threshold of the standard deduction. But with the new tax plan doubling the standard deduction, in most parts of the country, people would come out better, tax wise. But in the states with high property taxes, such as New Jersey, only the high priced homes would make a benefit of this deduction, the majority of New Jersey’s homes are valued for less than $800,000. And that is the approximate home value where the deduction would be beneficial.
Make no mistake about it. This will cause the real estate market to slow down, as it will have a bearing on the affordability of homes, especially for the first time home owners. And those buyers drive the entire marketplace.
And it may even drive the sale prices of homes down.