That's because both versions make changes to the longstanding tax benefits for homeowners, and Danielle Hale, chief economist at realtor.com, warns a lot of homeowners will see their taxes rise.
"One of the advantages for homeowners under current law is they can take advantage of the mortgage interest deduction," Hale told ConsumerAffairs. "The interest that they pay on a mortgage can be written off on their taxes so that it subtracts from their income and lowers their taxes."
Lower taxes mean more money that's available for a monthly mortgage payment, and Hale says if you have more money at your disposal, you can afford to pay more for a home. If you have less money, you can't afford as much house, and that is likely to put downward pressure on prices.
Changes to the mortgage interest deduction
The mortgage interest deduction could change drastically in the final version of the tax bill. The Senate bill leaves the maximum interest deduction at $1,000,000, but the House version drops it to $500,000.
Hale says that reduction would likely have little to no effect in markets where the median home sells for around $250,000; most homeowners in that segment would still be able to write off all their interest. But it would likely affect homeowners in the most expensive markets.
Hale says another change, present in both versions of the bill, would actually reduce the value of the mortgage interest deduction to millions of middle income homeowners.
"Under current law, in order for it to make sense to itemize your deductions, your total deductions need to be more than the standard deduction, which right now is around $12,000 for couples," Hale said.
If a couple had $10,000 in interest, a couple of thousand dollars in state and local taxes, several thousand dollars in other assorted deductions, it makes sense to itemize those deductions on their tax return.
Rising standard deduction
But in both versions of the tax bill, the standard deduction rises to $24,000 for a couple, meaning many homeowners would pay less tax if they just claimed the standard deduction. That change makes the mortgage interest deduction less valuable.
Both versions of the bill cap the current deduction for state and local taxes at $10,000. Hale says that will hit homeowners who live in high-tax states like California, New York, and New Jersey.
It will also hit homeowners in markets where property values are high, since expensive homes usually have high property taxes. The result will be higher taxes because a home will not be the tax shelter that it is now.
Since the end of World War II government policy has encouraged homeownership. Hale says there is a very good reason for that.
"Homeownership is one of those things that government has specifically tried to encourage because it has what economists call positive externalities, which means homeownership provides benefits, not just to the people who own the homes but to the greater community as well," she said.
Hale says she doesn't think the changes in the two versions of the tax bill diminishes the importance politicians place on homeownership, but she admits they are "promoting it less directly" in the tax bill.