Congress is working on a new tax bill, and the National Association of Realtors (NAR) broke down its potential impacts on a state-by-state basis.

According to NAR, 57 percent of Florida homeowners have a mortgage. Of those, 9.4 percent had a mortgage of more than $500,000 and 2.6 percent pay more than $10,000 in real estate taxes.

The average mortgage interest deduction taken by Florida homeowners was around $9,000 in 2016, and the real estate tax deduction averaged $5,100.

Currently, a typical Florida homeowner who lived in their house for at least two of the last five years would not pay any capital gains taxes if the house is sold. However, the latest proposals require them to live in their homes at least five years. If not, they’ll pay an average $12,360 in capital gain taxes at the time of sale, according to NAR.

In Florida last year, 14.9 percent of homeowners lived in their homes between two and four years, meaning about 1 in 9 owners would have to delay a sale up to two years if they hoped to avoid unnecessary capital gains taxation.

NAR’s Call for Action: Tell lawmakers to keep the U.S. tax code favorable for homeowners. The automated Call-For-Action system only takes a few minutes to complete.

Realtor efforts to influence tax reform

In politics, success is rarely defined as a single major win. With tax reform, victory comes in increments, such as increasing the cap for a mortgage-interest-rate deduction, and a bipartisan group of lawmakers speaking in Washington agreed that Realtors have played a role in keeping the tax code friendlier to homeowners.

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and Senate Banking Committee member Heidi Heitkamp (D-N.D.) joined NAR at its Washington offices on Wednesday to talk about tax reform, mortgage finance reform and other issues. The two agreed on one point: Realtors are playing a crucial role in the making of federal policies that affect real estate by providing the kind of realistic and useful input lawmakers need.

“I want to applaud Realtors for what they did during the tax reform debate, because when you sit on the sidelines and hope things get better, that’s not a strategy,” Heitkamp said at a half-day event called “The Future of the U.S. Housing Market.”

Hensarling thanked Realtors for playing an instrumental role in the House passage of comprehensive flood insurance reform about a month ago.

“Thanks to NAR for negotiating in good faith to move that bill forward,” Hensarling said. The legislation would reauthorize federal insurance for five years, though the Senate hasn’t acted yet on it. Among other elements, NAR sought to ensure grandfathering provisions would be retained for certain properties to protect them against sudden rate increases. Congress also could reauthorize the insurance on a short-term basis until long-term reform is passed.

Hensarling said he hoped that type of cooperation would also be present when lawmakers take up reform of the government sponsored enterprises that create the secondary market for federally conforming home loans. “Hopefully [what NAR did] will serve as model for the GSE debate,” he said.

Both Heitkamp and Hensarling said lawmakers are continuing their focus on tax reform.

Hensarling “enthusiastically” supports the bill currently in conference committee, and believes it will result in economic growth of more than 3 percent. That’s significantly higher than what it’s been during the recovery that started after the economic crash. That level of growth, along with lower tax rates, will help households better than anything government can do, he said.

Heitkamp took a dimmer view, saying the legislation goes against the priority the tax code has historically placed on homeownership. It does that, she said, by cutting or eliminating many of the deductions that households take today.

“You can’t just talk about the mortgage interest deduction,” Heitkamp said. She noted that while the MID is mostly preserved in both bills, the increase of the standard deduction will mean credit for mortgage payments will no longer factor into the tax picture of many homeowners. “You have to look at it in context of the other deductions.”

Heitkamp praised NAR for its involvement in the tax bill. “Your folks have been working day and night, as aggressively and transparently as they can be, to get this fixed,” she said.

NAR notched wins by getting the property tax deduction restored in the Senate version of tax reform, although it’s capped at $10,000, as in the House bill. And the association successfully made the case to leave current law in place for tax-deferred 1031 exchanges, an important tool for commercial property owners to defer capital gains when purchasing a like-kind property.

Going forward, NAR wants to keep current law in place for the MID, which means retaining the mortgage cap of $1 million and maintaining the capital gains exclusion on the proceeds of sale of a principal residence.

Source: Realtor Magazine, Robert Freedman