The number of homeowners who will benefit from the mortgage tax break is expected to plummet this year by more than half, according to a congressional report released on Monday.
About 13.8 million taxpayers will be able to claim the mortgage-interest deduction in 2018, down from more 32.3 million in 2017, estimates from the Joint Committee on Taxation show. That’s about a 57 percent drop.
Already, the deduction was not used by most taxpayers. Of the 150 million or so tax returns the IRS has received annually in recent years, just 20 percent claimed the deduction, according to research from the Urban Brookings Tax Policy Center.
The anticipated drop is largely due to the near-doubling of the standard deduction that took effect Jan. 1 under the new tax law. Fewer taxpayers are expected to itemize their deductions, which is the only way to take advantage of the tax break for interest paid on mortgages.
The new report estimates that 18 million households will itemize deductions this year, down from 46.5 million last year.
Taxpayers would need deductions worth more than the standard deduction for itemizing to make financial sense. And with few deductions left for taxpayers to turn to, that threshold will be a harder hurdle to clear.
For example, married couples filing jointly now get a standard deduction of $24,000, up from $12,700 last year. That amount for single filers is $12,000, up from $6,350. For heads of households, it’s now $18,000, up from $9,350. In combination with raising those amounts, the new tax eliminated personal exemptions.
For homeowners who will still be able to take advantage of the tax break, the interest they can write off is limited to $750,000 in loans, down from the previous $1 million.
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