The tax reform proposals swirling around Washington, D.C. right now make some sweeping changes to the tax benefits that homeowners have come to depend on. Here in Arizona, it has major implications.
Of the approximately 1,485,000 owner-occupied houses in Arizona in 2014, 957,000 or 64 percent had a mortgage, and 638,000 claimed a deduction for mortgage interest.
The grand total: $1.4 billion in deductions.
That deduction, however, will likely have far less (or no) value if Congress goes through with a plan to double the standard deduction, as fewer homeowners would itemize their taxes, taking the Mortgage Interest Deduction off the table for many Arizona families.
That is not the only deduction homeowners will lose out on, either. Homeowners are currently allowed to deduct the taxes they pay to state and local governments, but that deduction is on the chopping block for elimination.
The most recent IRS data available shows that at a marginal rate of 25 percent, the average taxpayer saved $640 in taxes as a result of the state and local property tax deduction. Congress is looking to reclaim those savings, taking it right from the pockets of homeowners.
That means homeowners will experience “double taxation” because income that is used to pay state and local taxes is never really received by the homeowners.
And when you total up all the changes included in the latest tax reform proposals, millions of middle class homeowners will see little benefit, while others will actually see a tax increase.
As this attack on homeownership takes hold, home values are projected to fall by 10 percent. This will impact homeowners at all income levels, whether they itemize or not.
As President of the Prescott Area Association of Realtors, I value home ownership, not simply for the livelihood it provides for Realtors, but for the impact it has on an entire community. Part of the American Dream has always been to own a home, and the benefits of doing so have been sought after and achieved by so many.
For most homeowners it is where wealth is built over years. It is our responsibility as citizens of this great nation to stand up and protect the rights and benefits of those who have worked to achieve that dream and those who seek to do so.
There are some good things in the tax proposals and tax reform is important, but the final product should reflect the tremendous value that homeownership offers the community.
If you own a home, or aspire to someday, I am asking you to let your Senators and Representatives know that doubling the standard deduction and removing a deduction for state and local taxes is not the way to achieve tax reform.
Brad Bergamini is president of the Prescott Area Association of Realtors.