GOP tax bill passes in narrow vote – path clear for President’s signature
Members of the House of Representatives voted 227-203 to pass the controversial GOP tax legislation Tuesday. The Senate followed suit Tuesday evening, voting 51-48 in favor of the bill, after which the House passed the plan again 224-201 in their revote Wednesday brought on by technical changes to the bill because of Senate Byrd rules. Despite the voting hiccup, the way is now clear for GOP leaders to send the bill to the President’s desk for a signature, which may not occur until January.
The final bill – most of which will take effect in 12 days – contains changes that will affect homeowners, but that differ from those proposed in earlier versions.
Under the House/Senate compromise, the mortgage interest deduction cap for new mortgage loans is reduced from $1 million to $750,000. Existing loans are subject to current law limits.
The bill allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes, while eliminating the deduction for moving expenses (except for members of the Armed Forces).
“[T]he conference committee has made some important improvements to the House and Senate legislation that ultimately will benefit some homeowners and communities,” said National Association of REALTORS® President Elizabeth Mendenhall.
The legislation maintains section 1031 like-kind exchanges, but only for real estate assets. Surveys indicate that a majority of REALTORS® have assisted clients with a like-kind exchange or taken advantage of the break themselves.
The capital gains tax exclusion on the sale of a principal residence – significantly changed in previous versions of the bill – remains intact. Couples may deduct up to $500,000 in gain at the time of sale if the home is occupied for two of the previous five years.
Still, “NAR remains concerned that the overall structure of this bill poses problems for homeowners and the broader housing market,” said Mendenhall.
Studies indicate that raising the standard deduction in the new law will dramatically reduce the number of taxpayers who itemize using the mortgage interest and property tax deductions, minimizing these homeownership incentives. In addition, by capping the interest deduction on purchases of future homes in higher cost markets, there is a concern that homeowners will be less likely to sell their current homes and purchase new ones.
That prospect could bode ill for the Seattle housing market, where inventory is at an all-time low and prices continue to rise.
The bill maintains seven tax brackets but at reduced rates from the current brackets; these provisions will sunset at the end of 2025.
Source: Tax Foundation
Seattle King County REALTORS® will continue to advocate for homeownership and urge Congress to vote No on legislation that negatively affects Washington homeowners.
More on NAR’s website on how the new tax law will affect real estate and homeownership.