How Will the Tax Bill Impact Homeownership?
As tax professionals scramble to fully understand the impacts created by the Tax Cuts and Jobs Act passed by Congress on December 20, many industry players are busy trying to gauge consumer reactions to the legislation in an effort to predict how the law will effect consumer and investor behavior.
One such entity is realtor.com, the real estate website. The company recently polled consumers nationwide to see how they feel about the law is being received.
According to the survey, the law is raising anxiety about owning a home, with a majority of respondents reporting that the tax bill makes them either “concerned” (36.2 percent) or “very concerned” (17.2 percent) about being a homeowner.
In contrast, less than a quarter of respondents said that the bill makes them feel “positive” (15.0 percent) or “very positive” (7.2 percent) about homeownership. Only 22.9 percent said that the tax bill would not change their plans to purchase, while 57.1 percent said that the bill would not change their plans to sell.
The Good, and The Not-So-Good
The Tax Cuts and Jobs Act will provide many people with higher after-tax incomes, which is expected to put upward pressure on home prices and mortgage rates.
It caps the mortgage interest rate deduction at $750,000 and increases the standard deduction, which will eliminate the tax benefits of homeownership for many people and could decrease sales and home prices in expensive areas.
Here is a breakdown of how consumers are reacting to specific aspects of the law:
- Nearly doubling the standard deduction and increasing child tax credits: 26.1 percent positive, 25.4 percent very positive.
- Elimination of the mortgage interest rate deduction on second homes: 12.4 percent very positive, 18.5 percent positive.
- Elimination of the deduction for personal casualty losses: 36.4 percent very negative, 20.1 percent negative.
- The bill will increase the deficit by $1.5 trillion over 10 years, according to the Joint Committee on Taxation: 37.6 percent very negative, 13.8 percent negative.
Of course, this data is very preliminary. People are still figuring out how the law will change their particular tax situation. It’s likely that consumer feelings about the changes will be in flux for some time to come.
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