Tax Reform Plans Slams Middle-Class Home Owners

Proposed changes to the tax code would effectively act as a tax increase on tens of millions of home owners.

House Plan

The House Republican tax reform plan hurts the middle class by:

  • Marginalizing the mortgage interest deduction and allowing only high-income earners to take advantage of this tax benefit.
  • Capping mortgage interest at $500,000 for new home purchases, which means that home buyers in expensive markets will effectively see the value of this housing tax incentive further diminished.
  • Eliminating the interest deduction for second homes and home equity loans.
  • Threatening the values of the largest asset held by most Americans and lowering household wealth.

Senate Plan

The Senate bill also fails to provide sufficient middle-class housing incentives; however, it does offer some improvement over the House plan:

  • Keeps the mortgage interest deduction cap at $1 million.
  • Retains the mortgage interest deduction for second homes.
  • Maintains the student loan interest deduction; the House bill does not.

The Solution: Homeownership Tax Credit

Both the House and Senate tax reform bills fall short in maintaining an effective homeownership tax incentive. NAHB is pursuing a plan that would provide a robust, broadly claimed homeownership tax credit that would help up to 37 million additional home owners who do not currently itemize.

NAHB’s Chief Lobbyist Jim Tobin explains why the homeownership tax credit will benefit middle-class home owners.

Understanding the Homeownership Tax Credit

Infographic: How the Homeownership Tax Credit Works