On December 7, Reuters published an article, subsequently shared by The Drudge Report, that is a quintessential example of why many on the right label mainstream media outlets as “fake news.” The article is titled “Millions would lose mortgage, gift write-offs under U.S. tax bill: study.” What this headline suggests is patently false. The actual text of the article is not much better, spinning the reforms to common tax deductions in the pending House and Senate tax reform bills to a nausea-inducing extent.
Before getting into the details, here is the truth: all three deductions the article references, mortgage interest, charitable donations, and state and local property taxes, remain in a significant form under BOTH the Senate and House versions of tax reform. Yet, the Reuters article states, “The left-leaning Institute on Taxation and Economic Policy said that up to 29 million U.S. households now writing off donations, home loan interest and state and local property tax payments would no longer be able to do so under either of the two plans.”
THAT IS FALSE.
The reality: taxpayers that qualify for these deductions will be completely free to continue utilizing them. To say they “would no longer be able to do so” is beyond misleading. The truth is that many millions of taxpayers would not choose to claim these deductions because under both versions of the bill they would pay more in taxes if they choose to do so. Both versions DOUBLE the standard deduction for individuals and couples. Thus, taxpayers’ mortgage interest payments, charitable contributions, and property taxes would need to exceed about $12,000 for individuals and $24,000 for couples for it to be more lucrative to claim these deductions instead of the standard deduction.
Simply put, instead of getting tax breaks for spending your money how the government wants you to spend it, all-but the most-wealthy individuals in the highest-taxed states and localities will get a larger tax break without strings attached. Americans will be free to spend or save this money in whatever way they feel is best for them… and that can include mortgage payments, charitable deductions, and property-tax payments, but this time with a little extra to spare.
As far as the reforms to these common deductions, even those are marginal in both bills. Both bills grandfather in existing mortgages, allowing homeowners to claim the same deductions they do now, while only changing tax treatment of new mortgages and home-equity loans. In fact, the Senate bill keeps the deduction as-is, while the House bill lowers qualifying new home-purchases from $1,000,000 to $500,000. Again, should the House version prevail, if you already have a mortgage on a home purchase of over $500,000, your qualifying deduction will not change.
State and local property tax deductions are capped in both bills at $10,000. This will only impact those with high-valued properties in high-tax states and localities. However, in regards to the claims in the Reuters article, the deduction remains in place for the vast majority of taxpayers who currently qualify for this deduction. They absolutely will be able to claim this deduction should they so choose.
Finally, there is no change to the charitable deduction. If a taxpayer chooses to donate to a registered charity, then they are free to deduct this gift under both bills.
Again, however, most taxpayers won’t choose to itemize their deductions and utilize these three tax breaks because the standard deduction will likely put more money back in their pocket to spend however they please! Contrary to the language initially used by Reuters, nothing prohibits those who qualify for these deductions from claiming them besides getting more of their money back through the standard deduction.
Reuters attempts to clarify these points much later in the article, but never succeeds in doing so. The headline and first several paragraphs read as if these deductions are being completely wiped out and that, as a result, Americans who previously qualified for these deductions will face a higher tax burden, when precisely the opposite is the case.
Reuters, this article is certified FAKE NEWS.
For a quick breakdown of the treatment of deductions in the House and Senate bills versus current law, check out this REAL news article in Forbes.