Central Mississippi REALTORS®
620 N. State Street Jackson, MS 39202
November 30, 2017
FOR IMMEDIATE RELEASE
"Why REALTORS® Oppose H.R. 1 “Tax Cuts & Jobs Act” & The Impact of Tax Reform for Mississippi Homeowners"
The “Tax Cuts & Jobs Act” was introduced in the House on November 2, 2017 and passed on November 16. This bill amends the Internal Revenue Code and seeks to reduce tax rates by modifying current policies, credits, and deductions by increasing the standard deduction and eliminating many exemptions.
Similarly, the Senate unveiled its version of the “Tax Cuts & Jobs Act” last week. This bill includes changes to the exemption on Capital Gains Tax from the sale of a primary residence, elimination of the deduction for state and local taxes, elimination of the Home Equity Loan Interest Deduction, restricts the deduction for moving expenses to only active duty military, and restricts the deduction for personal casualty losses to Presidentially declared disasters.
Why REALTORS® Oppose the “Tax Cuts & Jobs Act”
The “Tax Cut and Jobs Act” threatens homeowners with a loss of tax incentives and a reduction in home values. Eliminating the state and local property tax deduction and changes to the capital gains exemption will increase taxes now and when a home is sold. These incentives are critical for a strong housing market that creates jobs and builds stable communities.
Research by the National Association of REALTORS® indicates that the average first-time homebuyer makes a down payment of less than 10 percent, meaning that millions of owners of recently purchased homes would go “under water” on their mortgage.
Facts about real estate tax deductions in Mississippi:
In 2016, approximately 50 percent of the 734,000 owner-occupied houses in Mississippi had a mortgage. Of those, 3% had a mortgage value over $500,000 and paid over $100K for real estate taxes. Vacation homes accounted for 3.6% of the housing units in Mississippi. Other facts to note are:
Capital gains exemption
Under current tax framework, a typical owner who has lived in his house for at least 2 years out of the last 5 years will pay nothing in capital gain taxes if he sells his house. Under the proposed tax frameworks, owners need to live in their house for at least 5 out of the last 8 years in order to claim the exemption. Otherwise, they would pay $3,615 in capital gain taxes.
In 2016, 11.9% of owners in Mississippi lived in their homes for 2-4 years. These owners will not be able to take the exemption based on the proposed tax frameworks anymore.
Impact on housing prices
If both mortgage interest and real estate taxes deductions are eliminated, home prices would be expected to fall between 6% to 9%. A decline in value as projected could mean a loss in home value of $9,200 - $13,800 for the typical homeowner.
Stay Informed! Learn more about how proposed tax reform may impact you as a current or future homeowner and ways that you can take action at https://homeownershipmatters.realtor.
Sources: Internal Revenue Service 2015, American Community Survey 2016, National Association of Realtors® 2016, 2011; All calculations are by the NAR® Research Group.