The bill lowers the cap on mortgages that qualify The Tax Cuts and Jobs Act, the freshly minted tax reform bill out of the House, is proposing a new cap on mortgage-interest deductions (MID) that could have major implications for new homebuyers, particularly in pricy coastal markets.
Currently, taxpayers can deduct interest paid on loans up to $1 million, whether that value is accumulated over one house or many. The new tax reform bill proposes lowering that cap to $500,000, and according to the Wall Street Journal, appears to eliminate the MID for second homes.
The changes would only impact mortgages signed after Nov. 2, so existing mortgage interest would continue to be deducted under the old rules. This means the change is most likely to affect new and first-time homebuyers. Another change in the bill?a rise in the standard deduction? which sees a standard deduction increase $6,350 to $12,00 for single-filers and from $12,700 to $24,000 for couples. This means more taxpayers are likely to take the standard deduction as opposed to itemizing deductions like the MID.
The Tax Policy Center estimated before the release of the bill that a rise in the standard deduction would result in a drop in the number of itemizers from 45 million to 18 million. Because this diminishes existing tax incentives for buying a home, a number of home building organizations and lobbies have come out against the bill, including the National Association of Home Builders and the National Assoc...