Trump’s New Tax Proposal Could Have Substantial Impact on Seattle Homeowners

Trump Real Estate Deduction Seattle Tax Property Mortgage Interest

Trump’s Plan & the Seattle Market

President Donald Trump has developed a proposal to rewrite the tax code in such a way that it may render the mortgage interest deduction meaningless for all but a small minority of wealthy homeowners. Opponents argue that this provision would take away an important incentive of homeownership; supporters contend that the change benefits the majority of Americans and would expand homeownership opportunities for middle income earners.

Let’s examine Trump’s proposal in greater detail and highlight how the changes could impact the Seattle real estate market.

Proposed Revisions

The proposal contains a number of changes; perhaps the most important one is the raising of the standard deduction from its current level of $12,700 (for married couples filing jointly) to $24,000. On its face, Trump’s proposal does not eliminate the mortgage interest deduction, but its goal of substantially raising the standard deduction would mean that millions would cease to itemize their write-offs and consequently fail to deduct the interest from their home loan.

Trump’s plan also modifies existing deductions for state and local taxes, including property taxes. Opponents contend that the property tax deduction is another important perk of homeownership which should not be removed.

The Trump administration states that the changes will actually stimulate home purchases for low to middle income Americans because the higher standard deduction will enable greater savings. The proposal is also likely to trigger a measurable decline in average home pricings across the country which will increase access to homeownership.

Possible Impact

Currently, the Seattle real estate market has a median home price of approximately $722,250. This figure undoubtedly places Seattle among the most expensive real estate market in the country. Assuming the Seattle buyer puts down twenty percent, this median price means that the typical Seattle homeowner will pay roughly $2,735 per month in mortgage costs over a 30-year loan. Given its status, there’s no question that the Seattle real estate market will be impacted by the Trump proposal very heavily. A large number of our homeowners will suddenly be in a situation in which itemizing will no longer make financial sense. Trulia – the well-known property data provider – determined that the number of households eligible for the mortgage interest deduction in Seattle would drop from 56 percent down to 26 percent.

Whether Trump’s changes increase or decrease homeownership across the country obviously remains to be seen; what is certain is that the real estate industry as a whole is lined up in opposition to Trump’s proposal. Supporters and opponents both appear to have facts and figures which bolster their respective positions. Perhaps only a fair trial will determine whether Mr. Trump’s plan will be beneficial to the nation.

Source

Image credit: tiffany98101

To learn more about the mortgage interest deduction and other tax benefits of homeownership, see this presentation by our CPA Jessica Chisholm

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johnAbout john
Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

Huddleston Tax CPAs of Seattle & Bellevue
Certified Public Accountants Focused on Small Business

(800) 376-1785
40 Lake Bellevue Suite 100, Bellevue, WA 98005

Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching, Quickbooks consulting, bookkeeping, payroll and business valuation services for small business. We serve Seattle, Bellevue, Redmond, Tacoma, Everett, Kent, Kirkland, Bothell, Lynnwood, Mill Creek, Shoreline, Kenmore, Lake Forest Park, Mountlake Terrace, Renton, Tukwila, Federal Way, Burien, Seatac, Mercer Island, West Seattle, Auburn, Snohomish and Mukilteo. We have a few meeting locations. Call to meet John Huddleston, J.D., LL.M., CPA, Tawni Berg, CPA, Jennifer Zhou, CPA, Jessica Chisholm, CPA or Chuck McClure, CPA. Member WSCPA.