Lower mortgage deductions in a tax reform plan could hit some parts of South Carolina harder than others.
The plan, unveiled by U.S. House Republicans Thursday, would, among other things, drop the ceiling on mortgage deductions to a maximum of the interest on a $500,000 loan from the previous $1 million.
Thus far in 2017, some 2,237 homes in the Palmetto State have been sold with loans of at least $500,000, according to ATTOM Data Solutions. That is out of more than 99,000 home loans issued in South Carolina to date this year, or 2.3 percent.
While high-priced homes make up a small portion of total sales, they have been a strong point for the housing market since the real estate bubble burst a decade ago.
“So far, homes above $500,000 have made up 14 percent of sales nationwide” in 2017, said ATTOM senior vice president Daren Blomquist. “That’s the highest share we’ve seen going back to 2000.”
Within South Carolina, residents of Charleston County would be hit hardest by the change, with 520 sales of more than $500,000 this year, or 5.5 percent of total sales. The next hardest hit would be Beaufort County, with 4.4 percent of sales, and Greenville County, with 2.5 percent.
Richland County had the fourth most high-price home sales, with 288, or 3.9 percent of all sales. Lexington was seventh in the state, with 82.
However, South Carolina is at the low end of the impact scale.
Nationally, the market that would be most effected by the mortgage change would be the nation’s capital. Thirty-five percent of home sales in the District of Columbia have been for more than $500,000, followed by Hawaii, California, Delaware, Massachusetts and Washington.
How much an individual homeowner’s taxes would be affected ultimately would depend on their mortgage.
Blomquist calculates a homebuyer with a 30-year, $500,000 loan at 4 percent interest still would be able to claim a mortgage interest deduction of $19,839. At the other end of the spectrum, the owner of a home worth just under $1 million – who now can claim a mortgage interest deduction of $39,679 – would see the amount they save almost cut in half.
“If the idea is to stimulate the economy, at least this piece (of the tax plan) will run counter to that because it would have a dampening effect on home prices,” Blomquist said.
At the same time, “that’s not necessarily a bad thing,” he said. The last time sales of expensive properties were this prevalent was in 2005 – on the eve of the housing collapse that ultimately led to the Great Recession.
Proposed changes also would affect property taxes, low-income taxpayers, students
While most S.C. mortgage-holders won’t be affected by the lower mortgage cap, another piece of the proposed GOP reform would cap the deduction for property taxes at $10,000.
ATTOM estimates Charleston County – again the highest-priced housing market in the state – has 4,800 homeowners that would hit that cap – 3.7 percent of the county’s total.
Richland County has the fifth highest-number of taxpayers who would end up paying more, with 426 homeowners paying more than 10 grand – 0.3 percent of the total. Lexington would be the 10th most heavily affected county in the state, with 47 such properties impacted – 0.1 percent of the total.
Other parts of the proposed tax reform package would affect even more South Carolinians.
For instance, the proposal would increase to 12 percent, from 10 percent, the tax on the lowest-earning taxpayers. The interest on student loans also would no longer be deductible, hurting students and schools. And the deductions for state income taxes would disappear entirely.
That means South Carolinians would lose $4.1 billion in state income tax deductions, according to the state Department of Revenue.
How Obama made Nikki Haley apologize to Cuba
U.S. Ambassador to the United Nations Nikki Haley took time in a speech defending the U.S. embargo on Cuba to apologize to the Cuban people for a past action of the Obama administration.
Haley was speaking Wednesday at the United Nations against a Cuban resolution condemning the more than 50-year-old U.S. economic blockade of the island. When a similar measure came up last year, the Obama administration abstained from voting against it.
At the time, the U.S. government had just re-established diplomatic relations with Havana after a breach of more than half a century.
Haley not only reversed the U.S. position on the motion, she singled out the past administration’s reasoning for criticism.
“When the United States abstained on this resolution last year, its decision was explained by saying, ‘We recognize that the future of the island lies in the hands of the Cuban people,’ ” Haley said.
“There is a casual cruelty to that remark for which I am profoundly sorry,” the former S.C. governor continued. “Regrettably, as of today, the future of Cuba is not in your hands. It remains in the hands of your dictators.”
Despite her vote, and a chillier attitude toward Cuba by the Trump administration, Haley reiterated the new administration will not turn back the clock on restored relations.
“That status is not changing,” Haley said. “Our friendship and good will toward the Cuban people remain as strong as ever.”
Speaking directly to Cubans, Haley said, “The American people strongly support your dream to live in a country where you can speak freely, where you can have uncensored access to the internet, where you can provide for your families, and where you can determine your leadership.”
Upcoming at the S.C. State House
▪ The Legislature’s trustee screening commission is looking at candidates for the boards of four state universities; Francis Marion, the University of South Carolina, the Medical University of South Carolina and Winthrop at 11 a.m. Monday.
▪ A Senate oversight panel reviews the operations of the S.C. Commission of the Blind at 10 a.m. Tuesday.
▪ A Senate education panel looks at merit scholarships and tuition discounts at 11 a.m. Wednesday.
▪ A House committee discusses how to prevent opioid abuse at 1 p.m. Thursday.