Everyone wants tax reform and Realtors are no exception. However, if the proposed tax reform is really to benefit the lower- and middle-class families as it is being promoted, then there needs to be some significant changes made before the bill can be approved.
The National Association of Realtors’ analysts reviewed the “Tax Cuts and Jobs Act” proposal and their research indicates that this is a direct threat to homeowners and consumers. Millions of homeowners will NOT benefit from the proposal and most will get a tax increase! Homeowners will lose substantial equity as their home values are predicted to drop by more than 10 percent if the bill is enacted.
The Tax Cuts and Jobs Act alters the requirements of the capital-gains deduction, which is very popular for those interested in re-investing their capital gains back into new properties. This ultimately will result in less development and investment in our communities. How many of us know homebuilders that make their livelihood by constructing a home, living in it for a few years while they are building another home, sell it and move into the newly completed home? This has been a tried and true method for those in the construction industry, and under the new rules, a homeowner will have to live in their home for five to eight years before a sale to qualify for the exemption versus just two of five years today. This will create serious hardship and expense for any homeowner who may have to move to a new location within a five-year time window.
Additionally, the National Association of Realtors is concerned that the tax proposal does not allow the mortgage interest deduction to be indexed to inflation, which will cause its value to diminish over time. It also eliminates the interest deduction on all home equity loans which will further dampen the economy as homeowners may be using those types of funds to send kids to college or to finance home improvements. When a homeowner loses these two deduction opportunities from their tax bill, they will actually lose value in their most valuable investment — their home.
As some tax rates are lowered, deep inside the fine print of the bill, housing programs are being slashed. Tax reform is being balanced by cutting funds to the Board of Housing, which means that most first-time homebuyers, veterans and multifamily loan programs will all be eliminated. These are programs that are specifically designed to help lower-to-middle income families into homes instead of rental units. Bond programs that help our senior citizens, mentally disabled and low income families into housing are cut. Our local banks and mortgage lenders are seriously worried about the impact that these cuts will have on those coming to them for home loans!
Finally, while Paul Ryan claims the benefits of being able to submit your tax bill on a postcard-sized piece of paper, 94 percent of Americans lose their incentives (and ability) to itemize their taxes and are unable to take advantage of their current tax incentives. NMAR joins the National Association of Realtors in telling our senators loud and clear to please vote “NO” on this bill!
Wirtala is the public affairs director for Northwest Montana Association of Realtors in Kalispell.