In a recent interview with the Wall Street Journal, Treasury Secretary Steven Mnuchin announced that mortgage tax deductions will remain in Trump administration’s tax plans. This does not, however, mean the government will refrain from changing the tax code in any way. Here’s what we can expect.
Currently, mortgage tax deductions allow homeowners who itemize their tax returns to write off mortgage interest of up to $1 million. According to the National Association of Realtors, more than 75 percent of homeowners have used the deduction at least once while owning a home. Although lately those who have taken advantage of this tax break have been recorded as wealthier homeowners, overall average savings remain at $1,950 a year.
As of the beginning of 2017, Mnuchin reported that this level of mortgage interest write-off will not be updated or changed. In an interview with Fox Business Network, he specifically stated, “we are not taking away the charitable deduction and we are leaving the mortgage interest deductions as is.” Now, there is discussion of reducing the write-off limit to around $500,000-600,000.
Although this shift may sound drastic, capping mortgage interest deductions at $500,000-600,000 is no big deal for the average taxpayer. In fact, according to James Gaines, chief economist at Texas A&M’s Real Estate Center says “it’s a big ‘so what?’” for most homeowners, as Urban-Books Tax Policy Center only predicts the benefit loss to be $130 per year.
Of course, it is difficult to determine exactly how reducing mortgage interest tax deductions will affect American homeowners. To stay up-to-date on the state of mortgage interest tax deductions, or to learn more about home financing in general, contact one of our mortgage specialists or subscribe to our blog today.