18
The best
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Real People, Real Results
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ZILLOW CHIEF
ECONOMIST WEIGHS
IN ON GOP TAX PLAN
Many in the housing industry have been
concerned over the possible elimination of the
mortgage interest deduction, but now that the
framework of the plan has been released, their
concerns are shifting to how the mortgage
interest deduction is changing.
In a Forbes article released in October,
authored by Zillow Chief Economist Svenja
Gudell, Gudell said that currently, 29 percent
of all U.S. homes qualify for the mortgage
interest deduction (MID), but under the
proposed tax plan, that number would fall
to 5 percent. Additionally, the plan includes
provisions to double the standard deduction
and eliminate deductibility of state and local
taxes, excluding property taxes.
"But a doubling of the standard deduction
would likely mean fewer American taxpayers
would choose to itemize their deductions and
opt to take advantage of MID," Gudell said.
Based on Zillow's estimate on the home
price necessary for both the MID and state
and local property taxes to exceed the standard
deduction, a current homeowner would have
to purchase a home of at least $305,000 for the
state and local property tax deduction to make
more sense than the MID. According to its
research, Zillow says that would encompass
about 30 percent of American homes.
With the proposed doubling of the standard
deduction and elimination of state and local
taxes, the homebuyer would need to purchase
a home of at least $801,000. is is about 5
percent of American households.
"Currently and under the proposed changes,
itemizing deductions and utilizing MID
makes the most financial sense in communities
with high housing costs and high local taxes,"
Gudell said.
For example, under the current law, Gudell
said 99 percent of homes in the San Francisco
metro would qualify for the combination
of MID and property tax deductions to be
beneficial. In Los Angeles, 96 percent of
households are eligible. However, in metros
such as Pittsburgh or St. Louis, only 10 percent
and 13 percent qualify respectively.
"Under the proposed changes, itemizing
deductions based on these two deductions
alone would make financial sense for 59 percent
of San Francisco homes and 30 percent of Los
Angeles homes, compared to about 1 percent
of St. Louis homes and less than 1 percent of
Pittsburgh homes," Gudell said.
