How GOP Tax Overhaul Will Affect MA Homeowners

The U.S. House of Representatives approved the GOP tax bill once again Wednesday, the last step in Congress for the legislation 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 Massachusetts.

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 Massachusetts counties will be affected by the plan, which Trump plans to sign in a televised ceremony Wednesday afternoon.

Many Massachusetts homeowners are going to lose the MID option. According to Zillow, more than half of all homes in 10 counties are eligible for the MID. But those numbers take a steep drop once the tax bill is passed, when more than half the homes will be eligible for the MID in only three counties.

In Barnstable County, for instance, 9 out of 10 homes are eligible for the MID, where only 30 percent would be after the tax bill passes, according to Zillow. There is an even more dramatic drop in Plymouth County.

Analysts say this could stunt home buying, meaning prices could drop.

Check below what percent of homes in your county are eligible for the MID under the current law as opposed to which percent would be eligible under the new law.

• Barnstable County - Current: 90.49 percent. New: 30.42 percent.
• Berkshire County - Current: 39.57 percent. New: 10.13 percent.
• Bristol County - Current: 76 percent. New: 9.28 percent.
• Essex County - Current: 93.64 percent. New: 36.33 percent.
• Franklin County - Current: 51.14 percent. New: 3.62 percent.
• Hampden County - Current: 33.32 percent. New: 3.27 percent.
• Hampshire County - Current: 72.59 percent. New: 7.54 percent.
• Middlesex County - Current: 95.93 percent. New: 60.56 percent.
• Norfolk County - Current: 98.2 percent. New: 55.3 percent.
• Plymouth County - Current: 94.53 percent. New: 28.6 percent.
• Suffolk County - Current: 97.11 percent. New: 55.82 percent.
• Worcester County - Current: 74.07 percent. New: 11.54 percent.

As has been reported, the new tax bill is also reducing the State And Local Tax deduction (SALT) to $10,000. This led to Business Insider naming Boston and Cambridge among the 10 worst places to buy a home if the tax bill passes.

All of this could have a chilling effect on real estate markets across the country, which are still recovering from the 2008 housing market crash. According to Moody's, the bill could reduce national home prices by as much as 5 percent.

According to an analysis by Zillow, 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 bill, the percentage of homes drops to 14.4 percent.

The worst of it could be in the Northeast.

"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."

Zillow's analysis is based on the estimate that homeowners are in their first year of paying back their loan — when interest payments are largest — and they have a 30-year, fixed-rate mortgage at a 4 percent interest rate. County property tax numbers were based on 2016 numbers from the National Association of Home Builders.

An analysis from The Tax Foundation in August says that reducing the cap would increase taxes primarily for high-income taxpayers.

See the full report from Zillow here.

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Feroze Dhanoa, Shannon Antinori, and Alex Costello, Patch staff, contributed to this report

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