Taxes.

Dou­bled stan­dard de­duc­tion could ex­ceed sav­ings many re­ceive now from the prac­tice

The Denver Post - - FRONT PAGE - By Josh Boak Man­del Ngan, AFP/Getty Im­ages

Pres­i­dent Don­ald Trump’s tax pro­posal would steer some away from de­duct­ing the in­ter­est on their mort­gage.

WASHINGTON» Each year, tax­pay­ers sub­si­dize Amer­ica’s home­own­ers by roughly $70 bil­lion, with the ben­e­fits flow­ing dis­pro­por­tion­ately to coastal ar­eas with high in­comes and pricey homes, from New York and Washington to Los Angeles and San Fran­cisco.

The sub­sidy for home­own­ers comes in the form of a de­duc­tion from their taxes for the in­ter­est they pay on their mort­gages. An af­flu­ent New Yorker, for ex­am­ple, would have saved an av­er­age of $3,694 in 2015, ac­cord­ing to an anal­y­sis of IRS data re­leased Wednesday by the real es­tate com­pany Apart­ment List. In metro Los Angeles, the de­duc­tion was worth an av­er­age of $4,568, in San Fran­cisco still more: $5,500.

But un­der Pres­i­dent Don­ald Trump’s tax pro­posal, some Amer­i­cans would likely be steered away from this tax break. Here’s why: Trump’s plan would dou­ble the stan- dard de­duc­tion, which tax­pay­ers can take if they don’t item­ize de­duc­tions. The dou­bled stan­dard de­duc­tion could ex­ceed the sav­ings many re­ceive now from item­iz­ing their ex­penses for hous­ing, state and lo­cal taxes and re­lated costs.

But the Trump plan would also elim­i­nate many ex­ist­ing item­ized de­duc­tions, in­clud­ing those for state and lo­cal taxes, so that some peo­ple who now item­ize might end up pay­ing more.

The pres­i­dent’s pro­posal would es­sen­tially marginal­ize the use of the mort­gage in­ter­est de­duc­tion, which is the gov­ern­ment’s pri­mary form of di­rect hous­ing as­sis­tance: It dis­trib­utes three times more money this way than it does in the form of vouch­ers for im­pov­er­ished ren­ters.

Trump ad­min­is­tra­tion of­fi­cials say their tax plan is de­signed to ben­e­fit the mid­dle class. Yet it’s not clear from the scant de­tails of the frame­work re­leased so far how many fam­i­lies would en­joy lower tax bills

and how many would face higher bills.

Even though the Trump mea­sure would pre­serve the mort­gage in­ter­est de­duc­tion, it’s con­fronting re­sis­tance from the real es­tate in­dus­try be­cause it would likely re­duce the num­ber of peo­ple seek­ing the de­duc­tion.

Es­ti­mates by the real es­tate firm Zil­low sug­gest that some­one buy­ing a home worth at least $305,000 to­day would still qual­ify for the de­duc­tion. But un­der the Trump plan, only homes worth $801,000 or more would re­ceive the de­duc­tion.

This has led the in­dus­try to push back against the plan.

“We don’t want to go back­wards — we don’t want to lose what in­cen­tives that we have,” said Jamie Gre­gory, deputy chief lob­by­ist for the National As­so­ci­a­tion of Real­tors.

Though the ben­e­fits of tax breaks for hous­ing skew most to­ward peo­ple in the top 20 per­cent of in­come, they also tend to help mid­dle class Amer­i­cans. Roughly half the house­holds in metro Washington with in­comes be­tween $74,000 and $112,000 — a group that could be con­sid­ered mid­dle class in that area — take the mort­gage in­ter­est de­duc­tion and saved an av­er­age $2,530 in 2015. The av­er­age home price in the Washington area is just be­low $400,000.

Ar­eas with lower home val­ues tend to ben­e­fit less from the de­duc­tion. A sim­i­lar group of mid­dle-in­come house­holds in Indianapolis — where the av­er­age home cost around $140,000 — saved only $655 on av­er­age in 2015, and just 19 per­cent of them took the de­duc­tion. The sav­ings for mid­dle-in­come house­holds are just $691 in Cleve­land, $666 in Lit­tle Rock, Ark., and $673 in Mem­phis, Tenn..

Pres­i­dent Don­ald Trump speaks on tax re­form Wednesday at the Har­ris­burg In­ter­na­tional Air­port.

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