The Tax Cuts and Jobs Act of 2017 was a real blow to home ownership tax deductions. By doubling the standard deduction, the bill essentially eliminated tax benefits for anyone who owned a recently purchased house worth less than $400,000.
That’s what I wrote about, here, last week.
But those deductions have never been the boon to middle class home ownership they’ve been made out to be. Instead, they’re mostly functioned as a tax break for people living on the expensive coastal cities and in high tax states. You win the tax-savings trifecta if you buy an expensive house in a high cost city in a state with a major income tax.
Others: not so much.
Try another part of the country, like Texas, and things are different. There is no state income tax. And while real estate taxes are high, the cost of homes is (or has been!) relatively low.
What’s the end result?
If you live in a middle-income home just about anywhere in Texas, chances are you’ve been better off taking the standard deduction for years, even decades.
Ditto lots of other places.
Here’s a link to a 1998 column that will show you how little tax deductions were worth to homeowners around the country back then:
https://scottburns.com/its-time-to-rethink-home-ownership-interest-deductions/
As always, we should beware of politicians bearing gifts.
This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.
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(c) Scott Burns, 2018