Home Invasion: Ownership Under Attack

Homeowners are likely to lose key tax breaks under the Republican tax plan. Particularly under attack are those individuals who own valuable real estate purchased with a mortgage, a summary of which follows:

• Under current US federal income tax law, a homeowner can deduct interest paid on the mortgage generally up to US$1 million; however, the proposal caps the deduction at US$500,000 for newly purchased homes.
• Unlike the UK, US state and local governments typically assess an ad valorem tax (i.e. a tax according to the value of the home) on real property located within the state or locality on an annual basis. The US federal government has subsidised this by allowing an unlimited deduction for real property tax paid to reduce taxpayers US federal income tax; however, the current proposal would cap this deduction at US$10,000.