Real Estate Taxes and Home Value: Winners and Losers of TCJA

Li, Wenli; Yu, Edison

doi:10.2139/ssrn.3548112

Cited by 2 publications

(7 citation statements)

References 15 publications

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“…We assume that the population grows at rate n = 0.01 . 15 Turning to household preferences, we follow previous studies of housing choice and durable goods (see, for example, Díaz 15 The US population grew at an average annual rate of one percent between 1990 and 2016 (US Census).…”

Section: A Demography Preferences and Labor Incomementioning

confidence: 99%

Implications of US Tax Policy for House Prices, Rents, and Homeownership

Sommer

Sullivan

2018

American Economic Review

145

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This paper studies the impact of the mortgage interest tax deduction on equilibrium house prices, rents, homeownership, and welfare. We build a dynamic model of the housing market that features a realistic progressive tax system in which owner-occupied housing services are tax-exempt and mortgage interest payments are tax-deductible. We simulate the effect of tax reform on the housing market. Eliminating the mortgage interest deduction causes house prices to decline, increases homeownership, decreases mortgage debt, and improves welfare. Our findings challenge the widely held view that repealing the preferential tax treatment of mortgages would depress homeownership. (JEL H24, H31, R21, R31)

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Section: A Demography Preferences and Labor Incomementioning

confidence: 99%

Implications of US Tax Policy for House Prices, Rents, and Homeownership

Sommer

Sullivan

2018

American Economic Review

145

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“…Our paper is also related to literature examining the impact of the current tax code on housing prices (Gilbukh et al., 2019; Peach & McQuillan, 2019; Rappoport, 2018; and Li & Yu, 2020). For example, Rappoport (2018) theoretically finds that the MID results in higher house prices and thus, by implication, its repeal would lower housing costs.…”

Section: Introductionmentioning

confidence: 86%

“…The passage of the Tax Cuts and Jobs Act (TCJA) of 2017 renewed interest in the treatment of housing in the tax code, particularly with respect to the mortgage interest deduction and the deduction for SALT (Davis, 2019; Gilbukh et al., 2019; Li & Yu, 2020; Peach & McQuillan, 2019; Rappoport, 2018; Sommer & Sullivan, 2020). We conduct an in‐depth analysis of the treatment of homeowners and renters under the current tax code to document how specific provisions within the TCJA have altered the support for homeownership but that the tax code still retains an overall substantial subsidy to homeownership—the continued nontaxation of the return on invested housing equity.…”

Section: Introductionmentioning

confidence: 99%

“…Third, we provide estimates of the marginal and average tax rates associated with housing expenses across income ranges. Several recent papers have estimated the effect that passage of TCJA would have on house prices (Li & Yu, 2020; Rappoport, 2018; Sommer & Sullivan, 2018). The user cost of capital models used in these papers require accurate estimates of the impact of the tax law on the marginal rate at which housing‐related expenses are deducted.…”

Section: Introductionmentioning

confidence: 99%

“…Several analyses of TCJA have summarized the provisions of TCJA that affect the taxation of homeownership and discussed their likely effects (e.g., Bressler & Killey, 2020; Dantas & Hembre, 2021; Gale et al., 2018; Li & Yu, 2020; Sullivan, 2020; Viard, 2019). Others have also provided estimates of the extent to which TCJA would affect the number and percentage of taxpayers that itemize the number and percentage with a mortgage interest deduction, and the number that would pay the alternative minimum tax (AMT) (e.g., Gale et al., 2018).…”

Section: Introductionmentioning

confidence: 99%

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Homeownership and taxes: How the TCJA altered the tax code's treatment of housing

Ambrose

Hendershott

Ling

et al. 2022

Real Estate Economics

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The federal government has long promoted homeownership through various provisions in the US income tax code. The Tax Cuts and Jobs Act of 2017 (TCJA) renewed interest and debate about the treatment of housing via the tax code, particularly with respect to the mortgage interest deduction and the limitation on deductions for state and local taxes. We document the extent that the TCJA magnifies the long‐standing unequal treatment of debt and equity financing of homeownership in the tax code. Our analysis indicates that most households no longer benefit from mortgage interest and property tax deductions. We also show how the limitations on the deduction of state and local taxes alter the costs associated with homeownership across geographic areas, and we provide detailed calculations of the average and marginal tax rates at which housing‐related expenses are deducted. The former are relevant to the tenure choice decision, the latter to the quantity demanded decision. Finally, we document that the lost tax savings associated with the inability to benefit from mortgage interest and property tax expenditures are often small relative to the primary tax benefit owners still enjoy: the nontaxation of the return on equity invested in the home.

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Real Estate Taxes and Home Value: Winners and Losers of TCJA

Cited by 2 publications

References 15 publications

Implications of US Tax Policy for House Prices, Rents, and Homeownership

Implications of US Tax Policy for House Prices, Rents, and Homeownership

Homeownership and taxes: How the TCJA altered the tax code's treatment of housing

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