Recently I wrote an post on this blog regarding the new tax plan that is being proposed by President Trump. The post was about how doubling the standard deduction would harm home owners in that it would take away from most people the benefits of deducting their real estate taxes and mortgage interest. Now let’s look at this from the other side.
A majority of tax payers already do not itemize their deductions. They simply take the standard deduction. Why? It’s simple. The standard deduction gives them a larger deduction than if they were to itemize. The higher earners who have the bigger, more expensive homes ( and the larger mortgage that quite often comes with that home ) are the ones who will benefit. But for the majority or taxpayers, the proposed larger standard tax deduction will benefit them.
Under the new plan, a couple earning up to $50,000 will pay no Federal taxes. Compared to the 2016 plan, this will save them $12,500. For an example, if they were to purchase a $300,000 home and get n FHA loan, the necessary down payment (3.5%) would be $10,500. The tax savings would be enough for their down payment. This could allow this couple to purchase their own home and achieve their share of the American Dream.
However, the down side of this example is that if they make $50,000 or less, they will not get approved for a mortgage in the amount of $289,500. They would need a considerably higher income to qualify for a mortgage. But – it’s a start.
But also, who knows if this tax plan will survive in it’s current state? It may be greatly changed.
Please take note of this, I’m not an accountant or a financial adviser. I’m a Realtor. Before you start to take action on my financial advice, please speak to your accountant of financial adviser.