NAHB Addresses Potential Fallout From Expiring Tax Breaks

A new fight over America’s tax system is brewing. Many of the tax breaks in the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire at the end of next year, and a scramble over tax law is already underway.

The National Association of Home Builders (NAHB) is keeping members informed about provisions that will expire on Jan 1, 2026 if no action is taken. To that end, NAHB conducted a series of webinars in October outlining potential changes. These include: 

Deduction for small business income

The TCJA provided a 20% tax deduction for qualified pass-through income –section 199A – for sole proprietorships, partnerships, and S-corporations. 

Individual income tax rates 

The TCJA lowered marginal income tax rates for many Americans. Those tax rates will increase to their pre-2017 levels if the TCJA expires without changes. 

Alternative minimum tax (AMT)

Many households benefited from this provision which increased AMT exemption amounts and raised the income levels at which the exemptions phase out. As a result, fewer households were liable for the AMT. If the higher AMT exemption limits expire, 4% of all taxpayers—7.2 million—will be subject to the AMT in 2026. Also, taxpayers subject to the AMT are unable to claim some tax credits and deductions, including completely losing the ability to deduct state and local income taxes.

Estate taxes

Another provision is the estate tax exemption, which doubled under the TCJA. If this expires, then the exemption would fall from roughly $28.6 million to about $14.3 million for married couples.

The standard deduction

The TCJA almost doubled the standard deduction, from $6,500 to $12,000 for individual filers, and from $13,000 to $24,000 for joint returns. This increase led to a significant reduction in the number of Americans who use the mortgage interest deduction.

Child Tax Credit

Another major provision of the TCJA set to expire is a boost in the child tax credit for most families.

The expiration of two aspects of the TCJA – limits on the state and local tax deduction and elimination of the deduction for home equity loans—would benefit some households. Many homeowners, especially those in states with high property taxes, experienced a tax increase when the TCJA imposed a $10,000 cap on their ability to deduct state and local taxes. If this expires, then all state and local property taxes will be fully deductible. TCJA also eliminated the separate $100,000 deduction for home equity lines of credit (HELOC), which would be reinstated. However, NAHB took action in 2017 to ensure homeowners using a HELOC to substantially improve their home could continue to deduct interest under the mortgage interest deduction, minimizing the fallout for remodelers from the loss of the separate HELOC deduction.