The Republican tax reform plan being unveiled Wednesday shows that while two popular deductions would remain intact, they’d become useless to the majority of taxpayers who now take advantage of them.
GOP lawmakers want to retain the tax breaks for mortgage interest and charitable contributions. Yet given that the plan is to nearly double the standard deduction, “many current itemizers would choose that instead, so a lot less people would use those deductions,” said Joseph Rosenberg, a senior research associate at the Urban-Brookings Tax Policy Center.
The plan is facing stiff opposition from elements of the real estate industry, most notably the National Association of Home Builders (NAHB). On Saturday, The Wall Street Journal reported that the association made a decision to formally oppose the GOP plan after top Republicans told them they wouldn’t replace the deductions, or give credit for property taxes.
Currently, taxpayers choose between the standard deduction or itemized deductions and use whichever amount is greater to reduce their tax bill. For 2017, the standard deduction is $6,350 for individual taxpayers, $9,350 for heads of households and $12,700 for joint filers.
In other words, if those amounts nearly double, a married couple would need deductions to exceed $24,000 to make itemizing worthwhile.
The Tax Policy Center estimates that of the 45 million tax filers who itemize, 38 million, or 84 percent, would opt for the $24,000 standard deduction because it would exceed the combined value of other deductions available to them.