GOP Tax Overhaul: How Illinois Homeowners Will Be Affected

The U.S. House of Representatives approved the GOP tax bill once again Wednesday, the legislation's last step in Congress before it heads to the President Donald Trump's desk. Multiple reports say the legislation will impact the housing market, and a report from Moody's estimates that provisions in the bill will reduce house prices, causing double-digit decreases in some areas — including parts of Illinois.

The GOP tax plan caps the mortgage interest deduction (MID) at $750,000 and limits the state, local and property tax deduction to $10,000. Under current law, interest paid on up to $1 million in mortgage loans can be deducted.

Current mortgages are not affected by the tax plan, but home buyers in many Illinois counties will be affected by the plan, which Trump planned to sign in a televised ceremony Wednesday afternoon.

An analysis by Zillow notes that the plan would leave only one in seven U.S. homes eligible for the mortgage interest deduction. In Illinois, the percentage of eligible homes will drop significantly, in some cases from nearly 10 percent to less than 1 percent. In Cook County, it will fall from more than 50 percent to just 13.18 percent; in DuPage, it drops from 77.65 percent to 18.22 percent; and in Will County, the number of eligible homes falls from 55.21 percent to just 5.86 percent, according to the report.

According to Moody's, the hit to national house prices is estimated to be as much as 5 percent and the impact is much greater for higher-priced homes, especially in parts of the country where incomes are higher.

"The Northeast Corridor, South Florida, big midwestern cities, and the West Coast will suffer the biggest price declines," Moody's writes. "Counties such as Westchester, NY, Cook IL and Delaware PA will experience double-digit price declines."

According to Zillow's analysis, under current law, roughly 44 percent of U.S. homes are worth enough for it to make sense for a homeowner to itemize their deductions and take advantage of the mortgage interest deduction. Under the new tax plan, the percentage of homes drops to 14.4 percent.

Zillow's analysis says that more homeowners are likely to choose to take the standard deduction, which is doubled under the GOP plan.

Watch: GOP Tax Bill Clears Congress, Heads To Trump

Image via Shutterstock

By Feroze Dhanoa, Patch National Staff

Shannon Antinori, Patch National Staff, contributed