Any accountants on the board want to opine on this article and the conclusions drawn?
 Svenja Gudell , Contributor
Currently, a little less than a third (29 percent) of all U.S. homes are valuable enough to make taking the Mortgage Interest Deduction (MID) worthwhile for tax filers. Under recently proposed tax changes, that number would fall to just 5 percent.
Tax reform proposals currently being circulated by the Trump Administration and Congressional leaders maintain MID, a relatively popular deduction utilized by 22 percent of all U.S. taxpayers in 2015, according to the most recent data published by the Internal Revenue Service. The proposals also include provisions to double the standard deduction and to eliminate the deductibility of state and local taxes, which includes local property taxes.
But a doubling of the standard deduction would likely mean fewer American taxpayers would choose to itemize their deductions and opt to take advantage of MID.
To assess the impact of these proposed changes, Zillow estimated the minimum home price necessary in order for the combination of MID and state and local property taxes to exceed the standard deduction – both under current law and under the proposed changes. [1] When the standard deduction is less than these combined deductions (at a minimum), it is most likely financially advantageous for a homeowner to itemize deductions and take the mortgage interest deduction.
Under current law, a homeowner buying a home today would need to purchase a home worth a minimum of $305,000 in order for itemizing deductions and deducting mortgage interest and state and local property taxes to make more financial sense than taking the standard deduction. According to Zillow data, about 30 percent of American homes are currently worth that much or more. [2]
Doubling the standard deduction and eliminating the deductibility of state and local taxes means a home buyer purchasing a home today would need to buy a home worth $801,000 or more – about 5 percent of American homes.
Currently and under the proposed changes, itemizing deductions and utilizing MID makes the most financial sense in communities with high housing costs and high local taxes. For example, almost all homes (99 percent) in the pricey San Francisco metro are worth enough to make taking the combination of MID and property tax deductions a financially viable choice. In the Los Angeles metro, 96 percent of homes are similarly eligible. By contrast, only 10 percent of Pittsburgh metro homes and 13 percent of St. Louis metro homes exceed the minimum value threshold for making the MID and property tax deductions financially worthwhile.
forbes.com |
