Senate Tax Reform Bill a Better Starting Point

Filed in Capitol Hill by on November 10, 2017 4 Comments

While NAHB still opposes the current House tax reform legislation, the Senate bill released last night represents a big step forward.

Unlike the House bill, the Senate package provides meaningful tax relief for small businesses and keeps the complete Low-Income Housing Tax Credit program in place.

However, NAHB believes that both the House and Senate bills fall short in maintaining an effective homeownership tax incentive.

NAHB will work with lawmakers to achieve this goal as the legislative process advances by urging senators to support an amendment on the Senate floor to create a homeownership tax credit.

Improvements in the Senate Bill

Homeownership

  • Keeps the mortgage interest deduction cap at $1 million. It is lowered to $500,000 in the House bill.
  • Retains the mortgage interest deduction for second homes. This tax benefit was eliminated in the House bill.
  • Maintains the student loan interest deduction; the House bill does not.

Multifamily

  • The Senate proposal, like the House bill, would retain the Low-Income Housing Tax Credit in its current form. But while the House proposes to eliminate private activity bonds (PABs), effectively abolishing 4% credits, the Senate bill would retain PABs. This is a major win for affordable housing.
  • Allows like-kind exchanges for real property; the House bill does, also.
  • Shortens the multifamily and commercial depreciation period to 25 years
  • Makes no change to carried interest; retained in the House bill as long as the asset is held for three years.

Business

  • Provides a 17.4% deduction against business income for pass-throughs.
  • Recognizes the importance of the business interest deduction by allowing small firms with less than $15 million in gross receipts and, by election, any construction or development firm to retain this deduction.

A significant downside to the Senate bill: With the doubling of the standard deduction and elimination of the deduction of property taxes, the Senate package fails to provide sufficient middle-class housing incentives. Therefore, NAHB is still pursuing a plan that would provide a robust, broadly claimed homeownership tax credit that would help up to 37 million additional home owners who do not currently itemize.

Concerned members of the home building community can help by calling their Senators at 202-224-3121 and asking them to support adding a homeownership tax credit amendment to the tax bill when it hits the Senate floor.

For more information, contact J.P. Delmore at 800-368-5242 x 8412.

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Comments (4)

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  1. Leo Grote says:

    My income taxes will go UP under these tax plans. The deduction for state and local taxes makes my home affordable. This elimination affects millions even after the increase of the standard deduction. It makes my hoe less affordable.

    The housing market is still weak from the Great Recession. Eliminating this tax deduction would only exeracerbate the problem of the week housing market.

  2. Jeff Doxsee says:

    The single largest economic stimulator is homeownership via New Construction. Not only all the subcontractors (framers, electricians, plumbers, roofers, drywall contractors, trim carpenters, etc.) & suppliers, but also title companies, Realtors, Pest Control companies, home inspection companies, insurance agents,, etc. Homeownership also have an impact on all the ancillary related items that homeowners buy- lawn mowers, furniture, washer & dryers, grills, etc.

  3. Adam M Robinson says:

    The mortgage interest deduction should also include interest on home equity loans that are used to purchase or renovate homes. I believe the House bill excludes interest from HELOC.

    The reducing of tax brackets seems like a good idea because the “math” is easier. However a computer is going to calculate the tax due based on taxable income. The real complexity is determining taxable income. With few brackets the jump in taxes is dramatic. Assume filing jointly and taxable income is right at $90,000. Wife works second part time job and earns $5,000. That income will be taxed at 25% instead of 12%. that is a 208% increase. That is demotivating. If there were multiple brackets the tax change would be more gradual.

  4. Christine Kempa says:

    I’m a 28 yr veteran real estate broker. Residential real estate is the generator of jobs!!! Commercial follows residential. Reducing ANY financial benefit to owning real estate will kill the entire economy!

    No more smoke and mirrors! Pretend you’re an average homeowner or small business owner/sole proprieter/owner-operator, Etc. and do THAT math. You’ll soon find out this is the “Obamacare of the tax system”. FIX IT RIGHT OR LEAVE IT ALONE!!!

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