There’s a reason homeownership is still considered the “American Dream.” A home is a place to create memories, a means for building wealth, and a pathway to strength and stability in the communities we all call home.
Here in the San Fernando and Santa Clarita valleys, things are no different, and that’s something for lawmakers to remember as Congress embarks on an effort for comprehensive tax reform.
Middle-class families have built wealth for centuries through homeownership and real estate investment. Homeownership allows families to protect themselves against rising rents and inflation, while offering an opportunity to build equity over time.
Let’s face it: most families can’t get a loan to purchase stocks or invest in a mutual fund, but they can get a safe mortgage product at competitive rates to invest in a home. It’s a tremendous mechanism for building wealth that shouldn’t be taken away.
Best of all, homeowners aren’t the only ones who benefit. For every two homes sold, a job is created. In all, home sales support an average of more than 2.5 million private-sector jobs every year. At almost $3 trillion, real estate accounts for more than 16 percent of the U.S. gross domestic product (GDP). At the state level it accounts for more than 20 percent of the GDP.
That’s a big part of why, for over a century, the American tax code has incentivized homeowners. The country’s leaders acknowledge that a strong, stable housing market is good for everyone, which is why it deserves support.
Important tax incentives such as the mortgage interest deduction and the state and local tax deduction are a part of the tax code to ensure all creditworthy families have a fighting chance at the American Dream.
Currently, the legislation includes a cap on mortgage interest deduction at $500K for new mortgages, limits on the exemption on Capital Gains Tax from the sale of a primary residence, elimination of the deduction for state and local income or sales taxes, elimination of the Mortgage Interest Deduction for second homes, elimination of the deduction for moving expenses, elimination of the deduction for personal casualty losses, such as from earthquakes or wildfires, elimination of the deduction on interest on student loans and elimination of the deduction for medical expenses, even for the elderly. All this from a bill that is supposed to improve the current system.
If those went away, homebuyers would see their dream pushed further out of reach, while current homeowners would have the welcome mat pulled right out from under them.
This could also mean that the average California homebuyer could end up paying $3,000 more a year in taxes under the current proposal.
Comprehensive tax reform is a worthy goal, and lawmakers should be applauded for their ambitious approach.
As Congress continues working through this process, however, the incentives that put homeownership within reach for millions of Americans deserve full support from both sides of the aisle.
Take action now! Contact Congress today to oppose this reform.
Nancy Starczyk, 2018 President
Southland Regional Association of REALTORS®