Tax Rewrite Could Weaken Incentive to Buy Homes, NAR Expert Warns

Tax Rewrite Could Weaken Incentive to Buy Homes, NAR Expert Warns

Published by: the Illinois REALTORS Blog (written by Jon Broadbrooks) February 16, 2017

Federal tax code changes could have a dramatic impact on the real estate industry and consumers who count benefitting from the mortgage interest deduction, a tax expert from the National Association of REALTORS® said on Wednesday.

“This is an exciting time, and sometimes it’s so exciting that I wish we could settle it down a bit,” said Evan Liddiard, senior policy representative for federal taxation at the National Association of REALTORS®. He was speaking at a Federal Taxation Town Hall sponsored by Illinois REALTORS® in Naperville.

(Get copies of Liddiard’s presentation here)

Liddiard, who spent 20 years working on tax policy for U.S. Sen. Orin Hatch, said there are many factors that go into true tax reform, and even with Republican control of the House, Senate and the White House complications inevitably will arise.

Liddiard said broad consensus exists on both sides of the political aisle in some areas, particularly when it comes to corporate income tax rates. The corporate rates are among the highest in the world.

Of particular concern to REALTORS® would be the impact tax code changes might have on the Mortgage Interest Deduction (MID). One possible scenario would be to dramatically increase the standard tax deduction, which would dampen the value of itemizing on a tax return. Since the MID is a big part of a decision to itemize, it could undercut the tax advantages of home ownership.

Liddiard showed comparison of how various plans proposed to reform the tax code would add up for a 33-year-old, single woman renting a $1,000-a-month apartment and earning $65,000 annually. Assuming the purchase if a $263,000 condo with a 5 percent down payment and principal and interest payments of $1,193, the tax benefits from itemized deductions would be about $3,325 annually, or $277 a month under current rules.

But under proposed tax plans, that annual benefit could drop anywhere to $650 a year to as low as $91 a year, he said.

“This could demolish a tax incentive to buy a home,” he said.

In commercial real estate there are a number of proposals, including allowing immediate expensing for buildings and eliminating the 1031 Like-Kind Exchange. Liddiard said the 1031 Exchange elimination would be felt in the industry as research has shown that 63 percent of REALTORS® have been involved in the transactions which allow deferral of taxes if sale proceeds are reinvested.

Among those attending the session was Illinois REALTORS® Treasurer Dan Wagner who said while he was worried about proposed changes. he was optimistic that REALTORS® could fend off damaging changes.

“Our secret weapon is that we have 1.23 million very involved people willing to answer calls for action,” Wagner said. “That’s a very scary thing for them (policymakers.) Members and staff know we are a force of nature.”

For the full article… Visit the Illinois REALTOR Blog at: http://blog.illinoisrealtors.org/2017/02/tax-rewrite-weaken-incentive-buy-homes-nar-expert-warns

Tax Rewrite Could Weaken Incentive to Buy Homes, NAR Expert Warns

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