REVEALED: Democrats Hate Trump’s Tax Plan Because It Removes This Key Loophole Rich Democrats Love

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Before we get into the real estate ramifications portion of the GOP tax bill, let us recall and reiterate the fact that zero Democrats voted for a tax plan that cuts the corporate tax rate to 21% from 35% to make American corporations more competitive and bring more taxable income home, simplifies the tax code and eliminates some deductions, trims other deductions, and does away with a personal exemption, all of which would result in around 48% of U.S. households receiving tax relief of at least $500, according to the Joint Committee on Taxation.

The GOP tax bill has now passed through Congress and is awaiting President Trump’s signature. It remains to be seen if he will sign it before the end of the year or the start of next year. Whatever happens, homeowners in wealthy parts of the country will be affected most by the GOP tax law.

Wealthier households usually take more of an advantage of certain tax breaks that are set to be downsized or eliminated, such as the mortgage deduction or the local and state tax deduction. Most affected states will be New York, California, Connecticut, and Hawaii.


The Ryan-McConnell-Trump Tax Cuts and Jobs Act is about to become law as the final bill passed on Wednesday in both the Senate and the House, fulfilling yet another one of Trump’s major promises on the campaign trail. The tax bill will undoubtedly help the well-off tax paying Americans in many ways, but in terms of real estate, wealthy homeowners will be disproportionately hurt by this financially.

Many blue states such as California and New York will be affected by three significant policy changes in the bill. First, the reduced mortgage interest deduction cap will help homeowners reduce their overall taxable income. Second, the increase of the standard deduction. And third, the state and local tax deduction restriction.

Svenja Gudell, Zillow’s chief economist, estimated that about 44% of U.S. homes are worth itemizing the mortgage interest deduction. This amount would fall to 14.4% under the new bill. Housing interest groups forecast that the scaling back of tax incentives for homeownership would hurt home prices in the priciest markets, discouraging people from moving and resulting in an overall lack of home buying with the lack of listings.

The overall impact on housing prices remains uncertain at this point. But that did not stop the National Association of Homebuilders from warning about a coming housing recession. Whatever happens will not begin to be felt for another year or two. This new mortgage interest deduction cap only applies to new purchases, which could lead to current homeowners being even more reluctant to move. With the lack of new home building going on these days, this could drastically affect the housing market nationwide.

“While more disposable income for buyers is positive for housing, the loss of tax benefits for owners could lead to fewer sales and impact prices negatively over time with the largest impact on markets with higher prices and incomes,” said Danielle Hale, the chief economist at

But people do not buy homes simply on how much they can deduct on their taxes. They buy a home to find a home and set down their roots.

“A very small fraction of the home buying public actually makes the purchase price decision based on their tax deduction,” Tom Porcelli and Jacob Oubina, economists at RBC Capital Markets, said in a note.

Still, the GOP tax law will hurt wealth blue state homeowners for sure. We shall see how great an impact it has but it is changing things up in a way that benefits more Americans who need it overall. Let’s see what will happen of it.

Via InvestmentWatchBlog

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