Regarding the proposal to limit mortgage interest deduction (links to the bill can be found here) he said that there is currently about 50/50 support and feels that it could pass.
Beyond limiting deductions on primary residences, a huge question exists on how this bill impacts rentals. One of the first lines of the bill states that mortgage interest deductions will be disallowed except for primary residences (which will be limited). Here is the current wording: “Disallows, for purposes of personal income taxation, mortgage interest deduction for residence other than taxpayer’s principal residence.”
My concern regarding this line in the bill is that if mortgage interest is disallowed for rental homes, those rent prices are likely to skyrocket. But those organizations who favor the bill, say that this rule doesn’t apply to rental homes – its just “second” homes (I’m not seeing clear definition on this). Even tax professionals have agreed on this interpretation.
I’ve learned over the years to be skeptical and verify information as much as possible – even when there is a broad consensus – and last night Bill validated my concern that this could impact rentals. He told me that the wording is pretty explicit in disallowing mortgage interest for deductions on anything other than primary, but that behind the scenes amendments are taking place. Some of the revisions include exceptions for rentals, and some of the revisions make it clearer that landlords cannot deduct interest. So… what really passes we won’t know for sure until it goes through.
I’m going to remain somewhat neutral on whether or not the deduction should be granted to landlords. But, what does concern me is that this could have an enormous impact on rent prices, and the public hasn’t had a chance to weigh in.
The good news out of the meeting last night was a discussion on the savings account bill for first-time home buyers. He said that this is getting bipartisan support and is expected to eventually pass once they work out all the information.
The last thought on the deduction: removing these deductions can be passed through the legislature without being voted on.
Representative Bill Kennemer can be reached at firstname.lastname@example.org for more questions.