One of the more controversial pieces of the recent tax reform package now being mulled over in Washington is a provision that would scale back the very popular mortgage interest deduction, a benefit which many Fort Lauderdale residents and other people who live in South Florida enjoy as a perk of home ownership.
Specifically, the proposal would cap the interest deduction so that a taxpayer could claim an interest deduction on the first $500,000 of their residential mortgage principal. Currently, the cap is set at $1 million. Moreover, the new law would make it clear that only a person’s primary residence is eligible for the deduction.
Exactly how this would affect South Florida’s residential real estate market is a matter of opinion, with some experts predicting bad results in the residential real estate sector if the proposal passes as it is written. Other experts do not anticipate a significant impact.
According to one expert, about 15 percent of homes sold in nearby Miami closed at between $500,000 and $1 million, and those would be the homes and families affected by this change. It is worth noting, however, that of these homes, over one-third of them were paid for outright in cash, meaning the interest deduction would be irrelevant.
While the tax reform is still in flux and its impact still unclear, it is important for homeowners and would-be homeowners in the area to keep a close eye on this legislation as it makes its way through Congress. Depending on the ultimate outcome, Fort Lauderdale residents interesting in buying a home or upgrading to a new one may want to consult with an experienced real estate attorney in the area.
Source: Miami Herald, “Trump wants tax reform. Could it hurt South Florida real estate?” Jane Wooldridge, Nov. 3, 2017