Tax Reform Would Limit Ways Filers in High-Cost Markets Can Reduce Their Bill

• Proposed tax reform would increase the standard deduction from $6,350 to $12,000 for individuals, and from $12,700 to $24,000 for married couples.
• The legislation caps the mortgage interest deduction for newly purchased homes at $500,000 (down from $1 million), and will allow a maximum of $10,000 in property taxes to be deducted.

The proposal to double the standard tax deduction is one piece of the Congressional Republicans’ tax plan that could put more money in middle-income Americans’ pockets. For many Americans struggling with high housing costs and for young adults paying high rents and dreaming of buying their first home, this could be something of a reprieve. By capping deductions for mortgage interest and property taxes, the proposals would reduce the ways higher income taxpayers can limit their tax bill. In particular, higher-income homeowners in high cost/high tax states could see their tax bill go up. Writing specific numeric thresholds into law –as the proposal does with the mortgage interest and property tax deductions – means the value of these deductions will erode over time as home values increase. Changes to the corporate tax rate also alter the incentives for investing in affordable rental home construction through the low-income tax credit.