Sen. Maria Cantwell was part of the wave of Democratic lawmakers speaking out Friday against the GOP tax plan, focusing on the proposed changes to deductions.
Those changes could deal a painful blow to a soft spot for many people living in the Puget Sound – homebuyers and builders.
"It's already hard enough to buy a home in Puget Sound," said Cantwell. "We don't want to make it harder."
Cantwell stood before representatives in the home buying and building industry during a press conference on Friday. Their message – that the Republican-proposed changes to home mortgage interest and property tax deductions could have a chilling effect on the market.
"If there is no incentive to home ownership, we say why even bother? Why not just rent?" said Michael Orbino, managing broker with John L. Scott. "There is nothing wrong with renting, but our hope is that it's a phase in life."
Take the owner of a median-priced home in King County – $750,000. If he's paying 4 percent interest on a home loan and is in the 25 percent tax bracket, then he would get $7,500 in savings with the current deduction.
Under the GOP plan, the homeowner could only claim a deduction up to $500,000 of principal. If the loan interest and bracket are the same, his savings would be only $5,000.
That would result in a $2,500 loss.
But Seattle CPA Phil Hingston says one part of the Republican plan may help compensate for the other.
"The fact that you're not getting a deduction could be offset by being in a lower tax bracket," said Hingston. "But we don't know that yet, and it's obviously going to be different for everybody."
What could make up for it would be the Republican-proposed increase of the standardized tax deduction, which would double for a single person or a married couple. That could result in a substantial break for renters or others who have paid off their mortgages.
President Donald Trump promised the tax bill will be ready by Christmas impacting the 2018 tax year. The dramatic deduction changes could trigger a lot of phone calls to CPAs at the end of this year.
"Until we really know what is going away and what is staying, it's anybody's guess," said Hingston.
The GOP plan would also ax Washington state's sales tax deduction, which Sens. Cantwell and Patty Murray worked hard to reinstate and make permanent.
That means if you were planning on buying a big ticket item like a car and want the sales tax deduction, you might want to do it before the year is up.
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