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Our FERNSEHENMi25.06.2025 News Update, June 25, 2025 at 11:54AM CET
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The Nitty-Gritty
The property tax reform was promised to bring fairness. But it's turned out that some taxpayers now shoulder a heavier burden, while others get a break. Here's why.
The Mortgage Interest Deduction Factor
The Mortgage Interest Deduction (MID) is a big federal tax subsidy for homeowners. But its benefits are far from evenly distributed. Thanks to recent reforms like the Tax Cuts and Jobs Act (TCJA), many middle- and low-income households have lost the incentive to itemize deductions, thus reducing the MID claims for this group [1]. Higher-income homeowners, though, often have larger mortgages and higher tax rates, making the MID more valuable and concentrated among them. This means the high-rollars tend to get the bigger tax breaks, while others bear the brunt [1].
Assessment Formula Shenanigans
Specific state-level reforms aim to correct past property tax assessment inequalities. For example, New York has revised its assessment formulas, redistributing tax burdens. Some property owners see a reduction, while others face increased taxes based on the accuracy and fairness of the new valuations [3].
The Big Picture Adjustments
Large-scale tax reform bills, such as the "One Big Beautiful Bill," feature various changes affecting real estate income and deductions, like tweaks to Qualified Business Income deductions for real estate investments. These alterations can alter tax liabilities based on income sources and property holdings, impacting individuals differently [2].
In essence, the new property tax reform brings unequal impacts since it recalibrates deductions, assessment methods, and income-related tax benefits. These factors interact differently with each taxpayer’s financial and property situation. Higher-income, higher-mortgage homeowners largely retain or gain advantages, while others might face increased taxes due to reduced deductions or reassessed property values [1][3].
- The unequal distribution of benefits from the Mortgage Interest Deduction (MID) and changes in assessment formulas in certain states mean that high-income taxpayers often bear less of the property tax burden, while middle- and low-income households may see an increase.
- The "One Big Beautiful Bill," a large-scale tax reform Bill, adjusts various aspects affecting real estate income and deductions, leading to different impacts on tax liabilities based on income sources and property holdings. This suggests that the new property tax reform impacts taxpayers differently, with some bearing a heavier burden than others.
