How Imminent Tax Policy Changes Affect Devonshire Homeowners

What’s Changing?

The 2017 Tax Cuts and Jobs Act (TCJA) significantly increased the standard deduction, reducing the number of homeowners who itemize deductions for mortgage interest and property taxes. However, this provision is set to expire at the end of 2025, which could change how Devonshire homeowners approach their tax filings in 2026 and beyond.

The table above shows how many Devonshire homeowners and mortgage borrowers (highlighted in green) benefit from the currently high standard deduction because total mortgage interest and property taxes fall below the standard deduction. For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction rises to $15,000. For married couples filing jointly, the standard deduction rises to $30,000.

Will the Standard Deduction Be Extended Beyond 2025?

With a Republican-controlled Congress and White House, discussions about keeping the TCJA provisions in place are already underway. Lawmakers have a few options:

1. Full Extension: Congress could vote to make the higher standard deduction permanent, keeping the tax code as is.
2. Partial Extension or Adjustments: Lawmakers may modify the standard deduction, possibly tying it to inflation or loosening restrictions on mortgage interest and property tax deductions.
3. Expiration Without Renewal: If no action is taken, the standard deduction would drop back to pre-TCJA levels, increasing the number of homeowners who itemize.

If the Republicans want to build support among homeowners in Devonshire, they also must increase the SALT cap to allow fully deducting property taxes up to $15,000.

How Will This Affect Devonshire Homeowners?

If the standard deduction shrinks, the decision to itemize will depend on factors like mortgage size, interest rates, and property tax levels:

• Higher Mortgage Balances: Homeowners with larger mortgages are more likely to benefit from itemizing because their mortgage interest payments will likely exceed the lower standard deduction.
• Low-Interest-Rate Homeowners: Many who refinanced or purchased homes at historically low interest rates in recent years may find their total deductions still fall short of the new threshold, making itemizing less advantageous.
• High-Property-Tax Areas: Devonshire homeowners in high-tax areas may find that their property taxes alone push them toward itemizing, especially if changes are made to the current $10,000 cap on state and local tax (SALT) deductions.

What This Means for Your Taxes

If the standard deduction is not extended, the effective personal tax rate will rise for many homeowners and renters who do not pay significant mortgage interest or property taxes. More income will become taxable, leading to higher tax bills for many families. This could mean less disposable income for homeowners, making financial planning even more critical.

How to Prepare

With the future of tax policy uncertain, it’s a good time for homeowners to assess their situation. Consulting with a tax professional can help determine whether strategies like prepaying property taxes, adjusting withholdings, or making additional mortgage payments make sense.

The real estate market may also feel the impact, as tax incentives influence home-buying decisions. Potential buyers will need to consider how changes to mortgage interest deductions might affect affordability and whether to buy, sell, or refinance.

As Congress debates the fate of the standard deduction, staying informed will be key. Devonshire residents should be prepared for possible shifts in their tax liabilities and housing costs in the years ahead.

For personalized real estate advice from a Devonshire expert, call Brendan Hirschmann, REALTOR® at 972-559-4648. Brendan can provide you with the insights and guidance you need to navigate the current market trends and make informed decisions.