Uncategorized February 28, 2014

Draft Legislation of Federal Tax Reform Limits Mortgage Interest.

Representative Dave Camp (R-MI), chairman of the House Ways and Means Committee, released his draft for comprehensive reform of the tax code on Wednesday. The National Association of REALTORS® president Steve Brown expressed the association’s strong opposition and extreme disappointment in a statement released shortly after the proposal was unveiled. Among the many provisions outlined in the draft legislation was a proposal to make the mortgage interest deduction available only for mortgages worth less than $500,000, instead of the current $1 million (though currently held mortgages would be grandfathered).

Dave Camp on Tax Reform
The proposal also calls for tighter requirements for excluding gains on the sale of a principal residence. Currently, homeowners can exclude up to $250,000 in gains ($500,000 for married couples) on the sale of a home that has been their principal residence for two out of the five previous years, and they can claim this exclusion every five years. This proposal would change the residence requirement to five of the past eight years. The proposal also would eliminate the deductibility of state and local taxes.

The bill would repeal a special rule allowing deferral of gains on like-kind exchanges of “1031? investment properties.
Camp’s proposals are only meant to be a discussion draft and because of the political landscape and timeline, NAR does not believe Congress will tackle any tax reform bill in an election year.
The plan, which has been three years in the making, would finally illustrate the trade-offs that would come with Republicans’ long-standing promises to slash individual and corporate tax rates to 25 percent. It would cut sacred cows like the mortgage interest deduction, repeal the state and local tax deduction, impose a new tax on Wall Street banks, impose a surtax on the wealthy and pare the earned income tax credit, among other changes.

Republicans are trying to emphasize that it’s Camp’s plan, not the party’s plan, by noting that it’s only a discussion draft, not a bill. They liken it to previous drafts he’s issued in recent years, to little notice outside the tax world. His plan won’t get the H.R. 1 designation Republican say they’ve been saving for tax reform. And there’s no plans to put his proposal to a vote, even in the Ways and Means Committee. But some Democrats scoff at the attempts, noting Republicans’ annual budget, which was approved with the support of almost their entire caucus, includes language backing Camp’s tax reform bid.

Stay Tuned….