By Martin Kidston/Missoula Current
The vast majority of Missoula homeowners could find their mortgage-interest deduction useless under a new tax plan presented this week by the Trump administration.
Critics of the plan, unveiled on Wednesday, say it could also push homeownership beyond the reach of prospective buyers while nullifying the tax benefits of owning a home.
On Wednesday, Trump issued a brief outline of changes he plans to make to the tax code. The plan includes cuts to the corporate tax rate, abolishes the estate tax and looks to generally simplify filing returns.
Supporters contend the plan would put more money into the pockets of average Americans and boost economic growth.
But both the National Association of Realtors and the National Association of Home Builders have voiced opposition to the proposal. Doubling the standard deduction for mortgage interest from $12,700 to $25,000 would reduce housing demand and lead to lower home values.
“Those tax incentives are at risk in the tax plan,” William Brown, president of the National Association of Realtors, said in a statement issued after the tax plan was unveiled.
“Current homeowners could very well see their home’s value plummet and their equity evaporate if tax reform nullifies or eliminates the tax incentives they depend upon, while prospective homebuyers will see that dream pushed further out of reach.”
The Missoula Organization of Realtors offered similar comments on Thursday, saying it begs the question as to whether the nation prefers to own or rent their home.
“Any plans that dilute the mortgage interest deduction will discourage home ownership at a time when less than half of Missoula households own their home,” said Sam Sill, government affairs officer for the Missoula Organization of Realtors. “Such plans may also increase taxes for middle income homeowners. Tax reform may be desirable, but it shouldn’t be accomplished on the backs of home owners.”
Under Trump’s proposed plan, mortgage relief would remain, though the standard deduction would jump from $12,700 to $25,000.
According to an analysis by Trulia, that means average taxpayers would no longer find value in itemizing, since a married couple would need to have balance on their mortgage of around $608,000 before any tax break would kick in.
The median price of a home in Missoula is $254,000.
A drop in home demand could also drag values down across the country, according to Bloomberg. An economist with the Federal Reserve suggested housing prices would fall an average of 6.9 percent if the mortgage interest deduction were eliminated.
“Doubling the standard deduction could severely marginalize the mortgage interest deduction, which would reduce housing demand and lead to lower home values,” said Granger MacDonald, chairman of the National Association of Home Builders.