President Trump on Mortgages

BIG tax cuts! That is the anthem of Trump’s mortgage plan for affordable housing. His appointed Secretary of Treasury Steven Mnuchin announced a cap on mortgage interest deductions that will overall benefit the wealthy more than the intended middle class.

Ironically, this plan will cost the United States $96 million, paid for by foregone taxes. The deduction, modeled after Ronald Reagan’s 1983 “tax overhaul”, would endow homeowners to remove interest paid on their mortgages from their income. This popular proposal continues to remain untouched by any revisions, though changes were proposed by Republican House Speaker Paul Ryan.  This plan would limit incentives for people to buy homes.

If homeowners itemize their deduction on their home for tax breaks, it becomes more profitable to instead take the standard deduction. Simplified: there is more incentive to rent than buy. However, there is an incentive to buy bigger for those who already spend a lot on housing. Properties will become cheaper such as in New York or San Francisco with a decrease in housing prices due to a lack of buyers.

These tax deductions will also affect the middle class by actually making their taxes higher. On analysis conducted said that Trump’s plan would eliminate individual exemptions and remove the “head of the household” tax filing status. This would affect families and especially single parents the most by increasing their taxes.  The Trump administration declared they don’t believe in this analysis conducted by Lily Batchelder of the New York University School of Law.

To the wealthy, in this plan they would need to claim less for tax deductions. Donating large sums to charities can constitute a tax break for most philanthropists, but Trump’s plan would take away the incentive other than goodwill.  

His plan still remains vague, but with the proposals he announced, there could be a lot of changes to the housing market in the next four years.