Restoring SALT Tax Deductions Could Add $1 Trillion to Housing Value


Buried in the HEROS Act is a clause that would reinstate the SALT deductions that has driven many from large cities.

Congress passed the $3 trillion stimulus bill called the HEROES Act on May 15. Within the bill, there is a proposal to restore the SALT itemized deduction for 2020 and 2021, which will be under the Senate’s review, according to Forbes.

Real estate consultant Donna Olshan saw a 23 percent decline in the Manhattan luxury market that she covered, as well as a 3.2% decrease for closed sales in New York state outside of New York City.

In October 2019, Mark Zandi, chief economist for Moody’s Analytics, estimated that the changes in the SALT tax downgraded home values from a typical annual rate of 4%, equal to losing $1 trillion in U.S. home value.

Zandi indicated that middle class Americans are the ones impacted the most by the elimination of the SALT deduction, whom, unlike upper class Americans, cannot offset the loss in home value by gains in the stock market:

“For the very wealthy who have large stock portfolios, they may say, ok, I lost a little bit on my house but I gained a lot on my stocks. But for middle- income Americans who don’t own a lot of stocks and their house is the key asset that they own—-and that’s the case for most middle-American households—the tax law was a negative, because they lost a lot more from the reduction in housing value compared to what was gained in rising stock value. For middle-American households, the tax law probably made them less wealthy, not more wealthy.”

While the Senate is unlikely to pass the reinstallment of the SALT dedication, the current tax law will expire in 2025.

See the full report here.


Economics, Finance and Investing