The Republican tax plan didn’t do away with the mortgage interest deduction, as first feared, but it halves the cap on the deduction for newly purchased homes to $500,000. It does maintain the current deduction of up to $1 million in mortgage debt for current homeowners.
Nonetheless, the National Association of Home Builders (NAHB), the powerful housing industry lobbying group, strongly opposes the Republican tax plan.
“Capping mortgage interest at $500,000 for new home purchases means that home buyers in expensive markets will effectively lose this housing tax benefit moving forward,” said Granger MacDonald, chairman of the NAHB and a home builder and developer from Kerrville, Texas,
The move also threatens to undermine “the nation’s longstanding support for homeownership and threatening to lower the value of the largest asset held by most American families,” he said.
The Republican tax plan also nearly doubles the standard deduction, meaning fewer taxpayers would itemize and take the mortgage interest deduction. Now, about 21 percent of filers take the mortgage deduction. However, under the new tax reform, only about 4 percent would, according to recent estimates from the Tax Policy Center.
The NAHB Thursday also called on Congress to implement reforms to the nation’s housing finance system to ensure that housing credit remains readily available and affordable. Testifying before the House Financial Services Subcommittee on Housing and Insurance, NAHB CEO Jerry Howard said that Congress must focus on fixing the structural flaws inherent in Fannie Mae’s and Freddie Mac’s government charters that led to the breakdown of the housing finance system.