GOP Tax Bill Bad For Texas Homeowners
Weeks ago the Republican-led tax overhaul began. Based on the property tax deduction cap alone, the bill will have an outsized impact on Texas homeowners. Under the House bill, a Dallas area home worth just $435,000 would hit the $10,000 cap for property tax deductions. Data collected from ATTOM Data Solutions breaks that down into the raw numbers above this paragraph.
Northern Dallasites may be surprised it’s as low as that. But here’s the problem. How many of us will be at the cap in five years? The Republican plan appears to have no plan for increasing the cap ceiling as home values increase.
In Dallas, we’ve seen softness in the upper tier of real estate for well over a year. Ridding the ability to fully deduct property taxes will surely impact that already tougher end of the market.
How many years before a $350,000 house increases in value enough to hit the $10,000 property tax cap? What about a home worth $300,000? You may think it’s years away, but most metro homes have gone up by a third in value over the past five years. That $350,000 home in 2012 is likely valued at $470,000 today. That’s already $35,000 over the $435,000 needed to hit the cap in Dallas, and it happened in five years.
The other component was a reduction in mortgage interest deduction for mortgages valued at $1,000,000 down to $500,000.
Remember this is per year and cumulative. Next year it likely will jump to 13.8 percent of homes in Dallas County.
For every year property values increase, so will the number of mortgage holders with over a half-million in loans. What we’ll see is that it’s the in between spaces—the middle class—that’ll get hurt most.
The alternative Senate plan would keep the $1 million mortgage interest deduction but would eliminate interest deductions on home-equity loans. This scenario lessens the impact of homebuyers in the in-between spaces. However, the removal of the home equity loan interest deduction would have a biting impact on home renovation in all home price bands. It’s worth noting that home improvement is the highest reason people take out home-equity loans.