Tax reform proposal would cut many real estate deductions Though preliminary action on tax reform is at least a year away, homeowners need to grasp a sobering, emerging reality: To pay for a streamlining of the ballooning federal tax code and provide lower rates on income, theres a chance that Congress will demand that you give up long-entrenched tax subsidies that have put homeownership on a pedestal, supported prices and sweetened the household finances of millions of Americans for decades. Many long-standing home real estate tax benefits would be eliminated or sharply reduced under Rep. Dave Camps tax overhaul plan over two years in the making & will be on the table in 2015. So what did Camp propose? For the vast majority of individuals and corporations, enticingly lower marginal rates of 10% and 25%, plus a substantially increased personal standard deduction — $22,000 for married joint filers, $11,000 for singles. Individuals with annual incomes above $400,000 and joint filers above $450,000 would pay taxes at a marginal rate of 35%. In exchange, say bye-bye to the mortgage interest deduction in its current form. The $1-million limit on mortgage amounts that qualify for interest deductions would phase down to $500,000 in four annual steps, with no indexing to inflation. This would effectively diminish its value year after year as inflation takes its bites. Besides these, Camps tax bill would: •End all deductions for local property taxes, which he considers subsidies for excessive spending at the local government level. •Eliminate credits for owners who make energy-saving improvements to their homes. •End penalty-free withdrawals from IRAs to help fund first-time home purchases. •Leave in limbo popular mortgage debt forgiveness tax benefits used by large numbers of short-sellers and foreclosed owners in the last several years. Camps plan is silent on extending the benefits — which are currently expired, awaiting extension — but in this case silence would be fatal. •Kill federal tax exemptions for state and municipal bond programs used to fund mortgages for moderate-income families. Distributed by Washington Post Writers Group.
Posted on: Tue, 11 Mar 2014 13:00:00 +0000
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