Ocean City Today

Realtors worry about tax cut bill

CAR members fear loss of home-related deductions will hurt housing market
By Greg Ellison | Nov 30, 2017

(Dec. 1, 2017) Local Realtors, like their counterparts across the country, continue to take issue with the Tax Cuts and Job Act legislation that was introduced in the U.S. Senate on Tuesday following House passage on Nov. 16.

Joel Maher, president of the Coastal Association of Realtors (CAR), said this week his group actively opposes the bill, adding that numerous CAR members contacted Congressman Andy Harris (MD-01) to express their concerns before the House passed its version of the measure.

“Tax reform as proposed will have a jarring impact on the real estate industry across the country, and that will definitely be felt here at home,” he said.

Obviously of concern to Realtors is how home sales will be affected by the elimination of certain real estate-related tax deductions now available to homeowners.

The House tax reform measure passed by a 227-205 vote, largely along party lines. Harris, who voted for the bill, has a different perspective on the legislations impact.

“Economic growth causes property values to rise, not fall, and the Tax Cuts and Jobs Act will bring on explosive economic growth in the United States,” he said.

Maher, however, said the house version eliminates numerous tax benefits presently available to homeowners.

“Our main concerns are preservation of the mortgage interest deduction, as well as state and local tax, home equity loan, moving expense, and student loan interest deductions,” he said.  “Not to mention the $1.5 trillion in additional debt that will be inherited by our children and grandchildren.”

In addition to his group, Maher noted the National Association of Realtors president described the legislation as “an all-out assault on homeownership.”

To back his assertion, Maher provided data recently compiled by National Association of Realtors researchers that indicated Marylanders could lose significantly if the legislation is approved in its present form. He noted that of the approximately 1.4 million owner-occupied homes in Maryland, roughly 74 percent had mortgages.

In 2014 roughly 950,000 Maryland residents claimed more than $9 billion in mortgage interest deductions. This resulted in taxpayers subtracting an average of $10,000 from their taxable income.

Maher calculated with a marginal tax rate of 25 percent, which varies from 10 to 35 percent, an average taxpayer saved $2,490 in taxes due to the mortgage interest deduction. In 2014, the mortgage interest deduction resulted in Maryland taxpayers saving more than $2.3 billion.

Changes to the real estate tax deduction are also problematic for Realtors, Maher said.

In 2014, more than a million state residents claimed that deduction for a total of more than $4.5 billion. Maher estimated the average taxpayer reduced their taxable income levels by approximately $4,250.

Calculating the impact based on a marginal tax rate of 25 percent, Maher estimated the average Maryland taxpayer saved more than $1,000 from the real estate tax deduction. The overall savings statewide in 2014 was more than $1.1 billion.

“If the mortgage interest deduction and real estate tax deductions were eliminated, the loss would not be a one-year event,” he said. “Homeowners lose out on these potential savings each and every year.”

With the legislation gaining passage in the House of Representatives, Maher said Coastal Association of Realtors members would now begin contacting their U.S. Senators to lobby against passage.

“We were disappointed to see that Rep. Harris voted in support of the proposal, but we’re confident Sen. Van Hollen and Sen. Cardin will stand up for homeowners and vote against the proposal.”

An attempt was made to contact Harris for additional comment, but he was in session and unavailable.

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