I extracted some highlights of a new tax bill that the House passed on Thursday. It's called the Tax and Jobs Act. This summary came from Realtor Magazine and represents the National Association of Realtors perspective on the bill. They are concerned that this bill could reduce property values and significantly impact middle income households......
Eliminates or curtails most itemized deductions, except those for mortgage interest and charitable contributions. The MID would be limited to mortgages of up to $500,000—half of the current limit—and the property tax deduction would be capped at $10,000.
Restricts the exclusion on gains from the sale of a principal residence by requiring households to live in the house for five of the last eight years, instead of two of the last five years. The bill also reduces the benefit for higher-income households. The exemption today applies to proceeds of up to $250,000 for individuals and $500,000 for married couples filing jointly.
Nearly doubles the standard deduction to $12,000 for individuals and $24,000 for married couples, but that increase is largely offset by elimination of the personal and dependency exemptions—a change that could hit larger families, as well as those with older children, particularly hard.
The House passage is the first of a multistep process before tax reform legislation can be enacted into law. In the Senate, the tax-writing Finance Committee is already working on its version of tax reform, and the full Senate may vote on the bill the week after Thanksgiving. That bill follows the same structure as the House bill but makes significant changes. Among other things, it makes no direct changes to the mortgage interest deduction, but it eliminates the deduction for all state and local taxes, including property tax. However, as with the House bill, the Senate version would limit the use of both tax incentives for owning a home to only about 5 percent of tax filers. Estimates show that this could lead to a drop in home values of more than 10 percent nationwide, with an even greater drop in high-cost areas.
—Robert Freedman, REALTOR® Magazine