This is a critical week for Congress for Tax Reform. The Colorado Homeowner could be greatly impacted. Here are some examples of what will happen:
Capital Gains Exemption Change
Under current tax framework, a typical Colorado homeowner, who has lived in his house for at least 2 years out of the last 5 years, will pay nothing in capital gain taxes if he sells his house. Under the proposed tax frameworks, owners need to live in their house for at least 5 out of the last 8 years in order to claim the exemption. Otherwise, they need to pay $19,125 in capital gain taxes. In 2016, 16.8% of owners in Colorado have lived in their homes for 2-4 years. These owners will not be able anymore to take the exemption based on the proposed tax frameworks.
Impact On Housing Prices
If both mortgage interest and real estate taxes deductions will be eliminated, home prices expect to fall from 7% to 11%. A decline in value as projected could mean a loss in home value of $24,000-$36,000 for the typical homeowner.
Tax Deduction Change
The average Colorado mortgage deduction is approximately $9,550. The average real estate tax deduction amount is $2650. This is a large hit to the average homeowner. If they are not able to deduct these two deductions, their income will be substantially changed. Some homeowners have the HOA and real estate tax combined into a Metro Tax. The homeowner was counting on deducting the HOA plus real estate tax this year. This would be significantly higher than a $2650 savings.
Contact Your Congressman
By contacting your Congressman and asking them to do the following, your will be helping the middle class:
Mortgage Interest Deduction: Retain current law to maintain a total cap of $1 million on primary first and second homes.
Capital Gains Exemption: Retain current law of exempting gains of up to $250,000 for single filers and $500,000 for joint filers for primary residence lived in for two of the past five years of ownership.
State and Local Tax Deductibility: The limitation of deductibility to property taxes should be expanded to include state and local income taxes and the cap should be increased and indexed to inflation.
These provisions would add needed protection to current and future homeowners and strengthen the ability of qualified American families to purchase a home. Please add these provisions to protect middle class homeowners and the American Dream of home ownership.