Posted on 01/03/2018 6:02:20 AM PST by Kaslin
Renters came out winners under the new tax law. For over a century, the federal tax code catered to homeowners and treated renters like second-class citizens. Homeowners have been able to deduct interest on their mortgages and home equity loans, as well as property taxes. Meanwhile, everyone, including renters, footed the bill for these deductions by paying higher rates. The new tax law at last begins leveling the playing field between renters and homeowners.
Millions of New Yorkers and Californians reap the benefits, because these states have among the lowest rates of homeownership in the nation, and renting is common. So ignore the hyperventilating from Democratic politicians that tax reform is a gift to the rich.
New York Senator Chuck Schumer condemns the new tax law as "a gut shot to the middle class" while "rewarding the wealthiest among us." Just the opposite is true. Tax reform benefits renters living in urban areas -- a key Democratic constituency.
Democrats are usually eager to slap taxes on millionaires. But today, they're defending deductions that benefit only the wealthiest homeowners in the country's most expensive East and West Coast enclaves. Places like Westchester County, New York, and Marin County, California.
Under the new tax law, everyone -- renters and homeowners alike -- will have their tax rates cut and their standard deduction almost doubled. Most will end up paying less tax. To cover the cost of these cuts, the law caps the mortgage deduction for buyers of the priciest real estate. Few homebuyers will even notice it, because they're not borrowing $750,000 or more. Last year, only 4 percent of homebuyers borrowed that much, and only about 100,000 buyers will take out such huge mortgages in 2018.
It's true that the cap will likely hit the wallets of the bicoastal elite. Some 64 percent of buyers in Manhattan's rarefied real estate market took out a mortgage that big, and 58 percent of San Francisco buyers did.
But the tax change certainly won't hurt middle class first-time homebuyers. On average, they buy homes with a median price of $182,500. In the past, the tax code encouraged wealthy homeowners to buy even bigger homes and borrow more. Great for the wealthy and the banks. No much help for the average Joe.
Homeownership isn't any higher than in the late 1960s -- with only 64 percent of households owning their own home. For minorities, the goal is even farther out of reach, with only 46 percent of black families and Hispanic families owning their home. So disregard the partisan claim that lowering the cap on the mortgage interest deduction is going to hurt the middle class.
The other major deduction for homeowners has been property taxes. The new law puts a $10,000 lid on deducting all state and local taxes combined, whether income, sales, or property taxes. Homeowners in most of the nation don't have much to worry about.
Hardest hit are a few tony counties with multimillion dollar homes like Westchester County, New York, where the average property tax tab is a whopping $15,000. For that, the streets should be paved with gold.
But only one-fifth of New York property owners pay over $10,000 and about 30 percent of New Jersey homeowners do.
Schumer rants against the new tax law, claiming it hurts "middle-class and working families." Baloney. Tax reform makes the tax code more progressive, not less. It imposes added costs on the wealthiest homeowners to fund across-the-board tax breaks for all filers. Including renters.
Homeowners still have the option of taking deductions for most mortgage interest and property taxes, but almost all will crunch the numbers and find it pays to take the nearly doubled standard deduction instead. Only 5 percent of filers are expected to itemize.
California's Jerry Brown calls the tax law "evil in the extreme." That's demagoguery. Most taxpayers will end up with more money in their wallets.
I find the terminology strange. Are more homes in these states not owned? Undoubtedly, the difference is the homeowner is someone who doesn't live in the building, and merely rents it to another, and thus a landlord. But, in a sense, all homes are "owned" (some exceptions, like large squatter population, Detroit, etc).
Trump’s new tax law makes high earners pay more. Yet the media/dems shout “tax cuts for the rich.”
“California’s Jerry Brown calls the tax law “evil in the extreme.” That’s demagoguery. Most taxpayers will end up with more money in their wallets.”
Well, in this case, as regards home purchases here in the SF Bay Area, there is some truth to what Jerry the Fairy is saying. Thanks to Proposition 13, people who have lived in their home for any length of time will be fine. But when homes change hands here under Prop 13, they are reassessed to 1% per annum of their current market value. The homes on our road were all built in the early 1980’s when Jimmah Cahtah had mortgage interest rate hovering around 20%. We built ours with 18.5% construction money, but we got a big home at a very low cost because there was little building going on and both labor and material costs were, as a consequence way down. Now, 30 years later, these homes are selling at a premium because there’s no more space to build and construction costs are very high. A relatively young couple bought the home across the road from us last year. Based on what they paid for the place, their property taxes are 4X ours, and the new tax law will not give them the ability to deduct all of it.
Except for the increase in standard deduction that everyone gets, how did “renters” win in this tax bill? The title is misleading.
Agree - it only levels the playing field by taking away a deduction for homeowners. Sort of like penalizing a lottery winner by taking away their prize but not giving it to those with a losing ticket. Dragging those who have been able to afford a home down to those who can't isn't really an advantage to renters and sounds like a Communist arguement for "equality."
being a renter myself i searched for it as well. If its lower taxes then thats not just for renters.
Wait a minute. The homeowners are getting to deduct the mortgage interest they paid from their gross before tax income. They are paying a property tax on the property, right? I always thought the offset was to encourage home ownership and broaden the tax base. The system trades property tax for income tax, thus transferring the taxes paid to local government instead of federal. When did renters have to pay property taxes.
Maybe my understanding is off.
Dems Lie About It
Dems lie about EVERYTHING.
Renters pay property taxes via their rent. While they aren’t assessed property taxes, their landlord is. Regardless, the renter pays it.
More "progressive"? Have we not been fighting so-called "progressive" thinking for many years now?
Right. Every home is owned by someone! Occupant, landlord, or as in our case, both.
That's why rents are much higher in a high-tax environment; if return on investment is insufficient why bother being a landlord?
>> Maybe my understanding is off. <<
Nope, you’re fine.
Rather, it seems merely that Betsy McC has a highly imperfect sense of economic logic — and/or there’s a serious deficit in her ability to indulge in clear thinking.
(I could call her an economic moron. But that wouldn’t be prudent.)
“”Except for the increase in standard deduction that everyone gets, how did “renters” win in this tax bill? The title is misleading.””
I’ve been reading and trying to find that tidbit in the article but so far, no luck. I have no idea what they’re talking about. But I will say I’m mighty tired (and retired) with only 3 days into the New Year that the articles themselves have nothing to do with the titles.... This is the 3rd time I’ve commented on that this year..
“”Renters pay property taxes via their rent. While they aren’t assessed property taxes, their landlord is. Regardless, the renter pays it.””
That would imply that renters will get a reduction in their rent, right? The landlords get a break on their taxes and it all equals out?? HA!
I am curious, before this were you ever be able to take the standard deduction? We are home owners and always took the standard deduction because we couldn’t itemize, and our property tax wasn’t enough to qualify us.
DUH
i’ve itemized forever. Past 35 years or so. And i have an accountant. We live in NYC so the deduction for state and local is quite large.
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