What Tax Reform Means for Pennsylvania Homeowners

LEMOYNE, Pa., Nov. 22, 2017 /PRNewswire-USNewswire/ -- The following is a statement from Kathleen McQuilkin, President of the Pennsylvania Association of Realtors®:

Tax reform proposals swirling around Washington, D.C. right now make some sweeping changes to the tax benefits that homeowners have come to depend on. Here in Pennsylvania, it has major implications which could be negative to many homeowners.

Roughly 61 percent of homeowners in the commonwealth have a mortgage, and 1.3 million claimed a deduction for mortgage interest in 2014. At a marginal rate of 25 percent, this means that the average taxpayer saved $1,820 in taxes as a result of the mortgage interest deduction.  The grand total: $9,863,101,000 in deductions.

That deduction, however, will likely have far less value if Congress goes through with a plan to double the standard deduction, as fewer homeowners would itemize their taxes, taking the mortgage interest deduction off the table.  

That's far from the only deduction homeowners will lose. Homeowners are currently allowed to deduct the property taxes they pay to state and local governments, but that deduction is on the chopping block for elimination.

The most recent IRS data available shows that at a marginal rate of 25 percent, the average taxpayer saved $1,260 in taxes as a result of the state and local property tax deduction. Congress is looking to reclaim those savings, taking it right from the pockets of homeowners.

That means homeowners will experience "double taxation," as their income is taxed at the federal level and then again for state and local property taxes.

Not only will homeowners see a hike in their taxes, but according to studies by Pricewaterhouse Coopers, home values will fall in the short run, by more than 10 percent. The drop could be even larger in high-cost areas and it could take years for home values to rebound from this significant decrease.

Tax reform is important, but the final product should reflect the tremendous value that homeownership offers the community. If you own a home, or aspire to someday, you'd be wise to let your U.S. senators and representative know where you stand.

The Pennsylvania Association of Realtors® is a trade/professional association that serves more than 30,000 members in the Commonwealth of Pennsylvania.

SOURCE Pennsylvania Association of Realtors