A crucial line in Trump's new tax plan will make it a lot harder to buy a $1 million home




 

REUTERS/Joshua Roberts


President Donald Trump's new tax plan just dealt a blow to many would-be homeowners.

The 429-page GOP tax plan, called the "Tax Cuts and Jobs Act" was revealed on Thursday and is being billed as a boon for hard-working middle class Americans.

But Republicans have proposed paring down popular homeownership incentives, which would likely affect millennials and millions of people living in high-cost housing markets.

The tax plan cuts the $1 million limit for the home-mortgage-interest deduction in half. The deduction allows homeowners to write off the interest they pay on home loans, effectively reducing their taxable income. The bill would apply to new home purchases and make it so homeowners can only deduct interest payments on up to $500,000 worth of home loans.

In previous generations, that may have been a typical mortgage amount for a first-time homebuyer, but today's young people are different. Millennials are "skipping starter homes," Zillow CEO Spencer Rascoff said, and moving straight to the $1 million range when its time to buy their first house.

The mortgage size on a $1 million home would be $800,000 - assuming the homebuyer makes a down payment of 20% of the purchase price, though some are putting down payments as low as 10%. Under the proposed bill, the homeowner could only deduct interest on the first $500,000 of the loan, leaving them to shoulder the rest of the principal and interest payments without the benefit of a tax deduction.

"Eliminating or nullifying the tax incentives for homeownership puts home values and middle-class homeowners at risk, and from a cursory examination, this legislation appears to do just that," William E. Brown, president of the National Association of Realtors (NAR), said in a statement.

What's more, home prices - and thus, loan amounts - are much higher in pricey coastal markets like New York City, San Francisco, Boston, Los Angeles, and Washington DC. Millennial populations in these cities are only increasing.

Two powerful trade associations slammed the GOP's tax plan on Thursday, reports Business Insider's Akin Oyedele, saying the reduction of a key benefit for homeowners could hurt the market.

Jerry Howard, the CEO of the National Association of Home Builders, estimated that 7 million homes would be excluded from the mortgage-interest deduction, amounting to about a third of the homes in California.

"You're talking about potentially causing housing recessions in some of the biggest markets in the country, and those kinds of recessions tend to have spillovers," Howard said. "We're worried about a national housing recession."

NOW WATCH: Here's how to figure out exactly how your take-home pay could change under Trump's new tax plan - CLONE

See Also:

SEE ALSO: The GOP tax plan doesn't touch your 401(k) - and that's a huge opportunity to build wealth

COMMENTS

More Related News

Security experts, Trump allies alarmed by Omarosa recordings
Security experts, Trump allies alarmed by Omarosa recordings

Former presidential adviser Omarosa Manigault Newman is drawing fire from President Donald Trump's allies and national security experts for secret recordings she made at the White House, including her firing by chief of staff John Kelly in the high-security Situation Room. Manigault Newman said

Omarosa says she secretly taped her firing, plays audio
Omarosa says she secretly taped her firing, plays audio

BRIDGEWATER, N.J. (AP) - Former presidential adviser Omarosa Manigault Newman said Sunday she secretly recorded conversations she had in the White House, including her firing by chief of staff John Kelly in the high-security Situation Room. It was a highly unusual admission, which immediately drew fire from allies of the president.

Omarosa Says Trump Is
Omarosa Says Trump Is 'Truly A Racist,' Concedes Complicity In White House Deceit

Omarosa Manigault Newman, a former Trump administration aide who is out with a new book about her experiences, discusses her dismissal by Chief of Staff John Kelly.

Rain pouring, Trump rages on Twitter and hangs with bikers
Rain pouring, Trump rages on Twitter and hangs with bikers

BEDMINSTER, N.J. (AP) - As rain dumped on his golf club, President Donald Trump raged on Saturday, lashing out at his Justice Department on Twitter before welcoming members of a "Bikers for Trump" fan group to the manicured grounds.

One year after Charlottesville rally, Trump says he condemns all racism
One year after Charlottesville rally, Trump says he condemns all racism

U.S. President Donald Trump said on Saturday he condemns "all types of racism and acts of violence," appealing for unity ahead of the anniversary of a deadly white nationalist rally in Charlottesville, Virginia. Trump drew strong criticism in the days after the Charlottesville rally last year

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Economy

facebook
Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.