What tax reform means here at home
Tax reform proposals swirling around Washington, D.C., right now make some sweeping changes to the tax benefits that homeowners have come to depend on. Here on Maui, it has major implications.
Due to our soaring housing prices, a high percentage of homeowners here have a mortgage. A total of 141,980 local homeowners claimed a deduction of mortgage interest with an average savings of $12,752. That is a grand total of $452,638,000 in savings claimed here in Hawaii just last year.
That deduction, however, will likely have far less (or no) value if Congress goes through with a plan to double the standard deduction, as many fewer homeowners would itemize their taxes, taking the mortgage interest deduction off the table.
That’s far from the only deduction homeowners would lose out on. Homeowners are currently allowed to deduct the taxes they pay to state and local governments, but that deduction is on the chopping block for elimination.
The most recent IRS data available show that at a marginal rate of 25 percent, the average Maui taxpayer saved $3,188 in taxes as a result of the state and local property tax deduction. Congress is looking to reclaim those savings, taking it right from the pockets of homeowners.
That means homeowners will experience “double taxation” because income that is used to pay state and local taxes is never really received by the homeowners. And when you total up all the changes included in the latest tax reform proposals, millions of middle-class homeowners would see little benefit, while others would actually see a tax increase.
This is an attack on homeownership that is being placed on the backs of middle-class homeowners to pay for huge corporate tax cuts, while their children and grandchildren are asked to take on an additional $1.5 trillion to the deficit.
This is a fundamental change in the fabric of our country. Therefore we need to decide if we want to remain a nation of homeowners or become a nation of renters. Tax reform is important, but the final product should reflect the tremendous value that homeownership offers the community. If you own a home, or aspire to someday, you’d be wise to let your representative know where you stand.
* Lawrence Carnicelli is the government affairs director for the Realtors Association of Maui.