Nearly 29 Million Taxpayers Will Lose Deduction; Middle Class Hit Much Harder Than Top 1 Percent
WASHINGTON – A new analysis of the House tax plan released today by the Institute on Taxation and Economic Policy (ITEP) finds that nearly 29 million households will no longer receive the property tax deduction under the Congressional tax reform plan, even with the $10,000 cap for property taxes in place. The report found that just 13 percent of high-income earners would lose their deduction, while 80 percent of middle-class homeowners – six times the percentage – currently claiming the property tax deduction would no longer be able to do so.
“The property tax provision of the House bill is a phantom deduction for all but the wealthiest taxpayers,” said Bob Chlopak, Co-Director of Americans Against Double Taxation. “Supporters of H.R. 1 have misled taxpayers by claiming this so-called compromise would protect most middle-class taxpayers, but the fact is 80% of those who have benefitted from this deduction would lose it entirely under the House bill. Homeowners beware: don’t believe the promises about your property tax deduction because most middle income taxpayers will lose entirely.”
The study analyzed the number of tax returns in each state and the District of Columbia that would no longer receive the property tax deduction under the House tax plan and found that overall, 71% of current claimants would lose the deduction. Importantly, this conservative analysis measures only those who would lose their entire property tax deduction; it does not account for households that currently pay more than $10,000 in property taxes, would continue to itemize, and would partially lose their property tax deduction. Among the findings:
- In 10 states, more than one million households would lose their property tax deduction: California, Florida, Georgia, Illinois, Michigan, New York, North Carolina, Ohio, Pennsylvania, and Texas.
- 33 states will see over 80 percent of middle-class homeowners lose their deduction, including states in all regions of the country, not just those referred to as high tax states.
To date, much of the discussion about the property tax cap in the House bill has ignored a more fundamental point, according to ITEP. As its post explains: “Regardless of the cap amount, most taxpayers will lose the ability to write-off their property taxes entirely because without the deduction for state income taxes, their total package of ‘itemized deductions’ will be smaller than the standard deduction.” ITEP notes that for many taxpayers, this will be a worse deal than current law, even with the more generous standard deduction in the House bill.
About Americans Against Double Taxation
Americans Against Double Taxation is a coalition of state and local government organizations, service providers and other stakeholders dedicated to protecting the state and local tax deduction (SALT), a federal tax deduction claimed by 44 million American taxpayers that supports vital investments in infrastructure, public safety, home ownership and education. For more information, visit AmericansAgainstDoubleTaxation.org.