Both the House and Senate reached an agreement on H.R. 1, the Tax Cuts and Jobs Act and just voted on final passage (after some Senate procedural “ping pong”) earlier today. Now headed to the President’s desk, this agreement will provide both homeowners and renters with more “take home” pay by lowering overall tax rates and nearly doubling the standard deduction. The conference committee preserved the option of deductibility of up to $10,000 in property taxes, and it also preserves the mortgage interest deduction for both first and second homes (though the cap on deductibility was lowered to $750,000).
Thanks to advocacy through the Mortgage Action Alliance (MAA) and the efforts of the integrated lobbying team at MBA, we are pleased to share the following wins for the real estate finance industry:
- Preserved the MSR Fix
The final bill incorporates an amendment to Section 13221 of the original Senate-passed bill offered by Senator Mike Rounds to create an exception for “any item of gross income in connection to a mortgage servicing contract.” Had this language not been included, the change in tax accounting for mortgage servicing rights would have had a devastating impact on the flow of capital that supports a robust and competitive real estate finance market, both single-and commercial/multifamily.
- Preserved the Capital Gains Treatment for Home Sales
The final bill preserves current law allowing homeowners to exclude up to $500,000 of the gain on the sale of a principal residence. This was another significant win, particularly since both bills had contained a similar provision and such a change could have disproportionately penalized growing families and discouraged labor mobility.
- Preserved the Low-Income Housing Tax Credit (LIHTC) and the tax-exempt status for private activity bonds (PABs)
The final bill preserves other key real estate investment incentives, including the Low-Income Housing Tax Credit (LIHTC) and the tax-exempt status for private activity bonds (PABs), as these provisions – in combination – help ensure the continued development of affordable multifamily housing, as well as access to affordable mortgage credit.
- Preserved the Business Interest Deduction for Real Estate and Like-Kind Exchange Rules for Real Property
The final bill preserves business interest deductibility for real estate, as well as Section 1031 like-kind exchanges for real property. Continued deductibility of business interest for real estate will ensure that the cost of financing remains affordable and real estate activity remains a vibrant portion of the economy. The current utilization of Section 1031 provides benefits that help promote ongoing investment patterns within local real estate markets, which, in turn, provides the foundation for economic growth.
Thank you for helping us keep these priorities front and center during the tax reform debate. Your advocacy makes a difference.
We stand ready to continue working with the Congress and the administration as this legislation is implemented – particularly on the treatment of business income for pass-through entities — to ensure that Americans, whether they own or rent, continue to have access to affordable and sustainable housing
With over 23,000 active MAA members and counting, remember- the larger the group, the louder the voice!
Here’s how you can continue making an industry impact today: