The GOP plan calls for doubling the standard deduction and lowering the cap on the mortgage interest deduction. The House’s plan reduces it to $500,000 from $1 million.
About 1.1 million Ohio tax filers claimed the mortgage interest deduction in tax year 2015, but that number would be sure to shrink considerably under the current tax proposal.
House Speaker Paul Ryan, R-Wis., said “with this plan, we are getting rid of loopholes for special interests and leveling the playing field,” adding most Americans will be able to do their “taxes on a form the size of a postcard.”
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But the National Association of Home Builders — and some other groups, including the National Association of Realtors —are expected to strongly oppose the House tax reform bill, Unger said.
“Although the plan retains the mortgage interest deduction, it would eviscerate existing housing tax benefits by drastically reducing the number of home owners who can take advantage of mortgage interest and property tax incentives,” she said.
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Tax filers who do not take the standard deduction on their federal income tax forms can itemize allowable deductions, such as the interest on mortgages on up to two houses and $1 million.
The mortgage interest deduction lowers the cost of purchasing housing and encourages people to take out larger mortgages to get a larger interest deduction, experts say.
Home buyers usually pay less out of pocket thanks to the tax subsidies.
But the House tax reform plan calls for reducing the cap on the deduction to $500,000.
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Some local home builders say that reducing the mortgage interest deduction and increasing the standard deduction would be bad for the economy because it would hurt new home sales and resales.
“The mortgage interest rate deduction is one of the cornerstone tax benefits for the American people that help them obtain the American dream of homeownership,” said Charlie Simms, one of downtown Dayton’s most prolific home builders and a member of the National Association of Home Builders.
In tax year 2015, about 1.1 million federal tax returns from Ohio taxpayers claimed the mortgage interest deduction, or about 20 percent of all returns filed in the state, according to the Internal Revenue Service.
Tax filers in the state claimed nearly $6.8 billion in deductions.
About 491,030 of the tax returns that claimed the deduction (or 44 percent) were from tax filers who reported incomes of $100,000 or more, the IRS data show. Only 13.5 percent of all tax filers in Ohio had incomes of $100,000 or more.
The National Association of Realtors has strong concerns about changes to the mortgage interest deduction, since efforts to cap the deduction is a de facto tax increase on homeowners and puts home values at risk, said Elizabeth Mendenhall, the association’s president at a recent media event.
The National Association of Realtors says the proposals could harm its 1.3 million members nationwide.
The association also has concerns about proposed changes to capital gains exemptions, deductions to student debt and moving expenses and the limitation or elimination of the deduction for state and local taxes, she said.
“The end result is an all-out assault on homeowners and homeownership that will raise taxes on many middle class homeowners, while millions of others will get no benefit at all,” she said.
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