How The GOP Tax Overhaul Could Affect Delaware Co. Homeowners

The U.S. House of Representatives approved the GOP tax bill once again Wednesday, the legislation's last step in Congress before it heads to the President Donald Trump's desk. How much Pennsylvania homeowners would benefit - if at all - depends on whom you ask.

Current mortgages are not affected by the tax plan, but home buyers in many Eastern Pennsylvania counties will be affected by the plan. An analysis by Zillow notes that the plan would leave only one in seven United States homes eligible for the mortgage interest deduction.

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.

According to Zillow's analysis, 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 tax plan, the percentage of homes drops to 14.4 percent.

The percent of homes under the new law where the mortgage interest in the first year of the loan would be high enough for a homeowner to take the MID instead of opting for the standard deduction falls drastically in many Philadelphia-area counties, Zillow says. The biggest differences will be noticed in Chester, Bucks, Montgomery and Delaware counties.

For example, the analysis says in Chester County, the MID benefits more than 79 percent of homeowners under current law. Under the new law, just 22 percent of homeowners would be better off opting for the MID over the standard deduction.

In Delaware County, where the MID benefits nearly 47 percent of homeowners, under the new tax plan it would benefit just 13 percent, the analysis predicts.

Here are the top 10 Pennsylvania counties that will see the greatest changes with relation to the MID under the new tax law. (The data shows the current percentage of homes that are MID eligible, followed by the percentage under the new law.)

Zillow's analysis says that more homeowners are likely to choose to take the standard deduction, which is doubled under the GOP plan, though it would eliminate the $4,050 exemption you get to take for each of your dependent children.

Multiple reports, meanwhile, say the legislation will impact the housing market in various ways, and a report from Moody's Analytics estimates that provisions in the bill will reduce house prices, causing double-digit decreases in some areas in the Northeast.

According to Moody's Analytics, the hit to national house prices is estimated to be as much as 10 percent and the impact is much greater for higher-priced homes, especially in parts of the country where incomes are higher.

Image via Shutterstock

With reporting by National Staff