Have you heard the news?The new administration is looking to revamp the tax code in a way that affects the long-standing mortgage interest deduction (MID). Some people are concerned this might impact home sales and drive down home values. I believe it will do just the opposite. First — a bit of background. Under the current system, you can include the interest you pay on your mortgage in your itemized tax deductions. If your itemized deductions turn out to be more than your standard deduction, you save more on taxes. Currently, about 20% of homeowners who have a mortgage take advantage of the MID for an annual average savings of $2,000 in taxes. Under the proposed new tax plan, the standard tax deduction would almost double. For example, the standard deduction for a married couple would go from $12,600 to $24,000. If this happens, an estimated 84% of people who currently itemize taxes would simply go for the standard deduction, and this is the part that has some people worried. After all, if people don’t take advantage of the MID, won’t this decrease the value of owning a home?Here are two reasons why that won’t happen. First, most people do not buy a home in order to save on taxes. A survey from 2015 confirms this fact. The top reasons why people buy a home include the need for change, an increase in income, or a baby on the way, but there’s no mention of saving on taxes. This bears out what most real estate professionals see in real life. “People don’t buy a home just to save on taxes.”Second, taxes will actually be lower under the proposed new plan. Traditional estimates of the impact of the MID assume other taxes stay the same. In this case, if the deduction goes away, home prices can indeed suffer to an extent. But under the proposed new plan, the overall tax burden will be less than it currently is. In other words, most people will not lose money because they aren’t claiming the MID. Instead, they will gain money by paying less in taxes altogether. With more disposable income, people will be free to spend more on a home. This will drive sales as well as prices. The fact is, current home prices around Mansfield keep increasing — not because of tax breaks, but because of tight supply. If you have any questions about the new tax plan and how it will affect the real estate market or you’re thinking of buying or selling a home in the Mansfield area, give us a call or send us an email. We’re always happy to help!