The Middletown Press (Middletown, CT)
Tax law hurts homeowners, Democratic report shows
Report: Third-district residents could see deductions disappear
NEW HAVEN — Under the new tax law, Connecticut homeowners will see many historic deductions disappear.
U.S. Rep. Rosa DeLauro, D-Conn., released the results of a report analyzing the impact of the new tax law on Connecticut homeowners, which details new financial penalties on homeowners and the tens of billions of dollars in new tax breaks for real estate developers.
The report, prepared by the Democratic staff of the House Committee on Oversight and Government Reform, shows the estimated impact on Connecticut and Third District homeowners specifically.
“Owning your home is the American dream. It’s your sense of your self, that you’ve succeeded, that your sustainable, that you can take care of yourself, your family, etc. and to make it harder for people to do that or put them in a position where they may potential lose their homes, it’s really outrageous,” DeLauro said.
Last Dec. 22, President Donald Trump signed the Tax Cuts and Jobs Act, which was called the the first overhaul to the tax code in 31 years, by House Speaker Paul Ryan, R-Wis. It was touted as a benefit to taxpayers and would “help create more jobs, increase paychecks, and make the tax code simpler and fairer for Americans of all walks of life.”
“My tax reform priorities have been the same since day one: bringing tax cuts for hardworking, middle-income Americans; eliminating unfair loopholes and deductions; and slashing business taxes so employers can create jobs, raise wages, and dominate their competition around the world,” Trump said in a statement last year before he signed the act into law.
However, the law removes several exemptions that homeowners have relied on for years.
Under the new tax law, homeowners are now prohibited from deducting interest on home equity loans if they use those funds for anything other than home improvements. Where people traditionally used those funds for unexpected medical emergencies, to pay for college education, or for any other purpose, they will be restricted from doing so, according to the report. The provision is retroactive, applying even to future interest payments on loans taken out by homeowners in the past.
“How are people going to cope?” DeLauro said.
Further, homeowners who used home equity loans to pay for home improvements in the past will also need to prove through receipts and documents how the loan was used. A homeowner could’ve had home improvement work done 10 years ago and will need to prove that the money was used for the improvement or lose the deduction, DeLauro said.
“About 152,600 homeowners in Connecticut with existing home equity loans will not be allowed to claim full home equity interest deductions as they did in the past,” according to the report, and “38,700 homeowners in the Third District with home equity loans are now prohibited from deducting their interest payments from their federal income taxes unless those loans are used specifically for home improvement.”
“The elimination of the traditional deductions is really going to negatively impact new homeowners and existing homeowners,” said Bridgette Russell, managing director of neighborhood housing services at the New Haven Home Ownership Center. For over 100 years, homeowners have been allowed to deduct interest on their home equity loans up to $100,000.
The tax law also removes the ability for homeowners to deduct mortgage insurance premiums for those with incomes below $100,000, which is required of most first-time homebuyers who don’t have a 20 percent down payment. But most first-time home buyers don’t have access to put down 20 percent so that elimination is going to affect most of them, Russell said. In the Third Congressional District, 87,800 homeowners will no longer be able to take that deduction, which on average was $6,939, the report said.
Further, homeowners will only be allowed to deduct state and local property taxes on their homes up to $10,000. Although 1,331,200 homeowners in Connecticut used to be able to deduct their full property taxes, about 444,900 no longer will be allowed to do so, according to the report. Further, 87,800 households in the Third District could see their property taxes increase.
Stephen Cremin-Endes, director of community building and organizing for Neighborhood Housing Services of New Haven, said these changes are going to affect his organization’s work because new homebuyers who get mortgages will have less money now to make those payments and will get less of a tax refund.
“It makes home ownership more difficult because now it’s harder to afford everything,” he said, adding he didn’t know how it would affect people individually, but “$600, $1,000 a year makes a difference for a lot of people.”
While homeowners are seeing their deductions dissolve, major real estate developers will see major breaks under the new law, the report said.
“New estimates from the Joint Committee on Taxation conclude that these tax giveaways to real estate developers total a staggering $66.7 billion in lost revenue over ten years,” the report said. “Just next year, the windfall for real estate developers due to these four tax changes will total nearly $3.7 billion.”
“Take a look at where the benefits of the tax cut went,” DeLauro said. “They went to millionaires. They could’ve given everybody $16 in minimum wage, but they’re getting rewarded, while homeowners, families, working people in this district will struggle.”