A national study published by the National Association of Relators (NAR), “Impact of Tax Reform on Owner Occupied Housing” has suggested that the current White House administration’s plan for tax reform could lead to an increase in income taxes for middle-class homeowners, despite assurances that the proposed reform would result in lower taxes.
The study, which was performed by PricewaterhouseCoopers (PwC), estimates that middle-class home owners with adjusted gross incomes between $50,000 to $200,000 would see an average tax increase of $815. Homeowners outside of that bracket would likely see a reduction in taxes.
The examined a tax proposal shares many similarities to the White House’s “Better Way for Tax Reform.” Elimination of all itemized and personal deductions except charitable donations and mortgage interest, doubling the standard deduction, capping the tax rate on pass-through business at 25 percent, and setting the top income tax rate at 33 percent are just some of the factors that contribute to a projected rise in middle-class tax payments.
Federal tax deductions on mortgage interest rates are one of the main incentives for owning a home, especially for low to middle income households. Looking forward, the PwC projects 26 million middle income families will file mortgage interest deductions in 2018. NAR fears that interest in home ownership will drop if a tax reform similar to the study is passed by Congress. Present-day homeowners currently account for 80 to 90 percent of the United States federal income tax.
NAR President William E. Brown issued a statement in response to the study’s findings, “without tax incentives for homeownership, [income taxes] could rise even further. And while we appreciate the Administration’s stated commitment to protecting homeownership, this plan does anything but.”
The White House website maintains that their proposed tax reform will ultimately cut taxes for low and middle income households, although at this stage it is unclear as to how their proposed tax reform will effect home owners and the housing market at large.