Sigh of relief for Realtors and future homeowners
In an interview to Fox Business Network on Wednesday, U.S. Treasury Secretary, Steven Mnuchin said “Let me first clarify, we are not taking away the charitable deduction and we are leaving the mortgage interest deduction as is.”
He added, “We think those are both very, very important.”
A thriving housing market absolutely depends on incentives provided by mortgage interest deductions (or MIDs).
An attractive MID enables homeowners to reduce their taxable income by essentially writing off the interest paid on the loan.
In the U.S., the mortgage interest deduction is currently capped at loans of $1 million for joint applications ($500,000 if filing separately), for their principle residence or second home, or the first $100,000 on home equity debt.
The interview comes on the heels of President Trump’s address to Congress, promising “massive tax relief” for middle class Americans. Not touching the MID should certainly be included as a part of that promise.
No worries, amigos
Mr. Mnuchin’s interview should put to rest concerns over possible changes. As we noted last year, the uncertainty surrounding the fate of MID was a cause of deep concern in the housing market throughout the Presidential election cycle.
Candidates from both parties had wildly varied plans to cap or get rid of MIDs altogether.
We’ve argued before how President Trump’s win bode well for homeowners and realtors.
Much of it was to Mr. Trump’s own real estate pedigree, as noted by NAR Senior Vice President Jerry Giovaniello at last year’s Realtor Party (RPAC). However, Trump’s rhetoric of “simplifying tax codes” may often be a euphemism for “going after homeownership incentives” Mr. Giovaniello noted.
In fact, the confusion persisted by the Trump’s own cabinet.
During a Dec 1 interview to CNBC, Mr. Mnuchin stated that Trump wanted to cap the amount of mortgage interest that taxpayers can deduct. This implied possible changes to the current cap structure.
Signs of settling
Many states were on the edge and worried such a premature move might slow their housing market and drag down the recovering economy.
[clickToTweet tweet=”Recent Fox interview with Mnuchin seems to suggest that no changes shall be made to MIDs” quote=”However, the recent Fox interview seems to suggest that no changes shall be made after all.”]
It may take till August 2017 to finally pass President Trump’s tax reform plan through Congress. If followed through, keeping MID intact would be a major win for our housing market and economy.