Tax reform is one of the major ticket items on the current administration’s agenda, a measure that Congress hopes to tackle now that they are back from summer recess. When President Donald Trump first announced his modified tax plan—the first comprehensive change in 30 years—one of the main amendments was the elimination of itemized tax deductions, which would be replaced by doubling the standard deduction.
However, two subgroups in the housing industry that would stand to lose on this change rather than benefit: real estate agents, and residential builders.
Real estate agents could see a trickle-down effect if the tax incentives for homeownership is weakened, according to the National Association of Realtors (NAR) Tax Reform August Recess Talking Points. They hold the opinion that limited itemized deductions will not entice enough homeowners to enter the housing market when inventory is short and prices continue to rise. Further, “Homeowners already pay 83 percent of all federal income taxes, and this share would go even higher under similar reform proposals. Homeowners should not have to pay a higher share of taxes because of tax reform.”
Residential builders could also be affected by changes to the tax code, according to the National Association of Home Builders, who also agree that doubling the standard deduction would have adverse effects on the mortgage interest deduction, even if it remains intact, and ultimately, “reduce housing demand and lead to lower home values.” Both organizations agree on the fact that tax reform is long overdue, but it cannot be at the expense of homeownership or the housing industry.
Secretary of Treasury Steve Mnuchin has said both he and the president would like to have a draft of tax reform before 2017 comes to a close.