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The proposal also seeks to limit home mortgage interest deductions to $500,000, half the current $1 million limit. McHenry County homeowners in 2017 have taken or refinanced 152 loans for property valued more than $500,000, about 2.8 percent of the total 5,503 single-family home and condominium loans, according to data from Attom Data Solutions.
Sue Miller, a managing broker at Coldwell Banker Honig-Bell in McHenry, said the legislation erodes benefits of being a homeowner by capping the mortgage interest deduction and eliminating the mortgage interest deduction for second homes, which will affect people who are relocating, military families and many job transfers.
"Millions of middle-class homeowners will take a hit," Miller said. "It is difficult today to convince people with values not being stable to buy a home and stay in that home. Some of the language in this new bill takes every reason for them to buy away."
Bill Ward, executive vice president for the Home Builders Association of Illinois, said Illinois is ranked 50th of the states in new home construction because of consumer confidence in Illinois.
"What this bill means for Illinois homebuilders is that fewer people will have the ability to transfer to buy a home and sell a home, and they are going to pay," Ward said. "I would ask everybody to sit down and look at taxes from last year and apply new provisions being proposed in Washington, and I’d ask Washington to slow down just a bit so we can do that."
Haisler said the provisions of reduction of capital appreciation will be significant. Currently, a married couple could exclude capital gains on their primary residence as long as they've lived there two out of the past five years, but the new plan increases that to five out of the past eight years.
Conor Brown, government affairs director for Heartland, said people also would no longer be able to deduct interest on their second homes, something he fears will hurt military personnel who sometimes can't sell their first home before being relocated.
"The snowbirds – will they keep their home in Illinois or in sunny Arizona? That will be a pinch point, as well, and will increase vacancy," Brown said.
Other deductions that would be eliminated include student loan debt interest and medical and moving expense deductions.