Unless you refuse to you watch the news these days (no judgments here), you know that both sides of the aisle have been in frenzy over the GOP’s proposed Tax Reform Plan. November 2, 2017, House Republicans unveiled their long-awaited Tax Reform Plan, firing the first shot signifying the beginning of a two-month race to overhaul the U.S. tax code. November 9, 2017, Senate Republicans answered and unveiled their own version of the proposed Tax Reform Plan. Both proposed Tax Reform Plans differ in significant ways, especially for real estate. While there are numerous significant changes to the current Tax Code as a whole, state/local tax deductions and mortgage interest deductions are the key areas of both Tax Reform plans that could have the most significant impact on real estate.
STATE AND LOCAL TAX DEDUCTIONS:
- The Senate Tax Reform Plan proposes to eliminate all state and local tax deductions (“SALT”). Under the Senate Tax Reform Plan, taxpayers would lose the ability to deduct their state and local property and other taxes from their federal tax returns. This is a MAJOR change to the current Tax Code.
- The House Tax Reform Plan proposes to allow taxpayers the ability to deduct local property taxes from their federal tax returns up to $10,000.00 dollars.
MORTGAGE INTEREST DEDUCTION:
- The Senate Tax Reform Plan proposes to preserve the current mortgage interest deduction for primary residences by allowing taxpayers to deduct the interest they pay on the first $1,000,000.00 of mortgage debt.
- The House Tax Reform Plan proposes to reduce the mortgage interest deduction threshold for primary residences to $500,000.00. As such, the proposed House Tax Reform Plan has caused a massive outcry from many real estate professionals and new homebuilders.
Clearly, both of the proposed Tax Reform Plans will have an immediate and potentially significant impact on the Florida real estate market. Of note, I anticipate that both Tax Reform Plans will continue to evolve over the coming months and I expect to see some give/take as we get closer to the end of 2017. With that being said, both the House and Senate will eventually have to agree on one Tax Reform Bill if there is any chance for the Tax Code overhaul to be passed before the end of 2017.
Berlin Patten Ebling will continue to monitor the evolution of the Tax Code overhaul in an effort to keep our readers informed as the Tax Reform Plans progress through both the Senate and House.
Berlin Patten Ebling, PLLC
Article Authored by William C. McComb, Esq. firstname.lastname@example.org
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