Q: The House Republicans' tax plan came out last Thursday, and I read that capping the mortgage interest deduction would hurt middle class families trying to buy or sell a home. Is that true?

Q: The House Republicans' tax plan came out last Thursday, and I read that capping the mortgage interest deduction would hurt middle class families trying to buy or sell a home. Is that true?

A: Not really! First, let's remember that the reason Republicans want to get rid of many existing deductions is to pay for massive tax cuts for extremely wealthy people. Once more: Republicans are cutting taxes for the super rich (primarily via cutting corporate taxes), and they need to find ways to pay for it. Currently, you can deduct interest on mortgages up to $1 million. Previously, we wrote about how this is a housing subsidy for the wealthy. The Republican plan would only allow deducting interest on mortgages up to $500k (and remember, people also put money down when buying a home - they don't borrow 100% of the cost of the property). Less than 3% of mortgages are above $500k, so capping the deduction means "For most of America, the impact would be minimal." This may impact high end of the real estate market in expensive cities, but this is not relevant for most middle class people. The real estate industry has a powerful lobby, and will fight this by pretending it hurts middle class homeowners at risk. This mainly impacts wealthier people, in order to benefit very wealthy people. 

-first published in the 11/5/2017 newsletter

Stephanie Lee