A new government estimate shows the Republican tax law cut the mortgage interest deduction in half, curbing one of the biggest tax breaks flowing to high-income earners.
The Joint Committee on Taxation, Congress’ group of tax experts, estimated Friday that $40.7 billion in mortgage interest deductions would be claimed in 2018, a massive drop from the $72.4 billion estimated last year before the law passed.
In 2019, the break would shrink further, to just $33.9 billion — less than half of what it would have been.
The Republican tax law decreased the mortgage deduction and other tax breaks in order to offset lower tax rates and other tax cuts. The law lowered the total balance of mortgage debt on which the interest could be deducted, from $1 million to $750,000.
It also made the break less relevant for many taxpayers by doubling the standard deduction, meaning that millions more people will simply take the standard deduction rather than itemizing specific deductions like the one for mortgage interest.
For that reason, the law also significantly cut down other prominent breaks. Friday’s estimates show that the deduction for state and local taxes was also halved. That break will account for $24.5 billion in deductions in 2018, down from $74.1 billion projected before the law passed. For people who still do claim the state and local tax deduction, Republicans limited it to $10,000.
The GOP tax law’s changes also mean that the smaller number of people who claim itemized deductions will be relatively richer.
Only about half as many people will now claim the mortgage interest deduction, according to the Joint Committee on Taxation. And 58 percent of total mortgage interest deductions will be claimed by people earning more than $200,000.
Critics of the break think that the fact that it is increasingly reserved for high-income earners could make it more susceptible to cuts by future congresses.
