NAR Weighs in on Trump Tax Plan

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Will Trump’s tax plan help or hurt the housing market? On Tuesday, the National Association of Realtors® was quick to comment on the proposal which would affect homeowners, renters, people who work from home, folks who are single and married—basically everybody.

NAR’s general consensus is the proposal is potentially harmful to the housing market. The tax plan, which President Donald Trump’s administration says contains the “biggest tax cuts in history,” could do away with tax deductions that middle-income earners have come to depend on.

“For over a century, America has committed itself to homeownership with targeted tax incentives that help lower- and middle-class families purchase what is likely their largest asset,” NAR President William Brown said in a statement.

Home values could plummet and equity could disappear.
Trump’s plan calls for doubling the standard deduction that taxpayers can use to lower their tax burden. But, that deeply diminishes the value of the mortgage interest deduction provided to help homeowners defray costs, and may discourage people from buying homes.
State and local property tax deductions are also in jeopardy. Homeowners in states with higher property values, like California, would suffer the most if they couldn’t deduct property tax payments from their federal taxes. Not having this deduction could cost them hundreds or thousands of dollars.

Freelancers and consultants who work from home could say goodbye to home office deductions, which are also on the chopping block. Expenses like Internet service, insurance and upgrades to computers and home office space could be a thing of the past.
So getting rid of the home office deduction “will have an impact on small businesses, startups, and consultants, who are all part of the middle class,” realtor.com’s Joseph Kirchner says.

Renters could be affected by proposed changes to the 1031 and similar exchanges used by investors for commercial real estate properties, like apartment buildings. Currently, exchanges allow investors to defer the capital gains taxes on sales of investment properties (like rentals) and reinvest that money into new, similar property purchases. Changes could make the exchanges less profitable, leading folks to invest elsewhere.

“It’s not going to have an immediate impact [on residential real estate], because demand is very strong for housing,” Kirchner said. “What this will do is it will decrease affordability,” especially for the middle class.

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