House Tax Reform Blueprint Could Bring 28% Home Equity Loss & $800+ Per Year Increase in Taxes
Not only does the House Blueprint for Tax Reform propose to eliminate business interest deductions—effectively introducing a new tax on the interest that small business borrowers already pay out to the big banks—it also proposes to increase the standard deduction such that far fewer homeowners would be able to meaninfully take advantage of the mortgage interest deduction that applies to personal residences. How does that affect you? It could cause you to lose equity in your home at a time when your taxes are increasing. Here's how.
You Could Lose 28% of Your Home Equity
An analysis by a Federal Reserve Board economist predicts a 6.9% average drop in home values if the market effects of the mortgage interest deduction were removed. An owner of a home worth $200k who owes $150k on it could lose as much as 28% of their equity—or $13,800!
| $200,000 | home value |
| $50,000 | home equity in dollars |
| 25% | home equity as percentage |
| $150,000 | mortgage principal |
| 6.9% | drop in home value resulting from policy change |
| $186,200 | resulting home value |
| $13,800 | home equity loss in dollars |
| 28% | home equity loss as percentage |
Your Taxes Could Go Up $800+ Per Year
A brand new study conducted by PricewaterhouseCoopers on behalf of The National Association of REALTORS calculates how changes to the tax code substantially similar to what is proposed in the House Tax Reform Blueprint would impact home owners. The analysis predicts that U.S. taxpayers with incomes between $50,000–$200,000 would be burdened with an $800+ average increase in taxes.
If you are concerned about the potential effects of the policy changes recommended in the House Blueprint for tax reform, contact your representative today to let them know.