In April, President Donald Trump released an outline of a proposed new tax code. The one-page proposal lacked detail, but the impact it would have on homeowners and potential home buyers stirred up concern. The Orlando title insurance professionals from Real Estate Closing Solutions are here to outline the proposal and how it would impact the real estate industry.

What’s Changing?

In the proposed tax code changes, the standard federal deduction would be raised to a level where a large number of homeowners wouldn’t be able to take advantage of the mortgage interest deduction (MID).

Who is Impacted by the Rise of the Deduction Level?

Bloomberg estimates that due to the rise, 25 million homeowners wouldn’t be able to take advantage of the deduction. Critics claim that this change would turn the MID into a perk that could only be taken advantage of by the wealthy. To put it into perspective, the current median-priced home in the U.S. is about $198,000. For a married couple, according to an analysis done by Trulia, they would need a mortgage balance of about $608,000 to take advantage of the deduction successfully. That’s more than triple the median home value. The impact would likely be greatest for middle-income renters who are considering purchasing a home.

It’s likely that this change could impact any city where buyers are trying to stretch their budget to afford rising sale prices. This rings true for Orlando and other cities such as Denver, Portland, Oregon, Boston, and Washington.

How Will it Impact Home Sales?

Limiting incentives offered to homebuyers may cause a decrease in home sales because their budgets wouldn’t stretch as far. The reduced sales would cause a trickle down response; home values could drop locally, ultimately leading to a value drop across the United States. The National Association of Realtors estimates that home prices would drop 10 percent nationwide.

The new tax proposal is something for homeowners and real estate agents to keep in mind when making decisions about the timing of home buying or selling. Overall, the impacts may not stop at homeowners who want to take advantage of the deduction; the drop of home values will impact sellers as well.

For more real estate news and insights, continue to follow our blog. If you’ve decided that now is the time for you to purchase a home, contact us today. As the leading Orlando title insurance providers, we want to help you make informed decisions throughout the home buying process.