GOP Tax Overhaul: How Long Island Homeowners Will Be Affected

The Republican tax bill is a done deal, which means that Long Islanders are going to find out who are the real winners and losers of the law. And according to a new study by real estate company Zillow, many potential Long Island homeowners are going to lose out due to a lowered cap on the mortgage interest deduction (MID).

The people who are going to be hurt the most are those who depend on the State and Local Tax deduction (SALT), which is being reduced to $10,000. This led to Business Insider naming Long Island the worst place to buy a home if the tax bill passes.

But there will be many on Long Island who will see a tax decrease, at least for the next few years. The child deductible is doubling to $2,000, and the Standard Deduction is also doubling to $12,000 for singles and $24,000 for couples.

• If you want to see how the tax bill will affect you, try using this calculator from Market Watch.

For the future, changing the MID could have a chilling effect on Long Island's housing economy. The MID allows homeowners to deduct the interest paid on their mortgages from their taxable income, which decreases their overall tax bill, instead of using the Standard Deduction. Under the current law, the MID is capped at $1 million. But under the GOP tax bill, that would drop to $750,000. The reduction would only apply to new mortgages, not existing ones.

According to Zillow, nearly every Long Island home is eligible for the MID (99.96 percent in Nassau and 97.29 percent in Suffolk) under the current tax law. But those numbers take a steep drop once the new tax bill is passed. In Nassau, a third of residents would lose the option for a full MID, with only 68.23 percent of homes eligible under the new bill. And in Suffolk, the effects are even more extreme — only 35.76 percent of homes would be eligible for a full deduction, according to Zillow. This could make it more sensible for some Long Islanders to use the Standard Deduction instead of the MID.

All of this could have a negative effect on real estate markets across the country, which are still recovering from the 2008 housing market crash. According to Moody's, the bill could reduce national home prices by as much as 5 percent. And it would be worse for areas like Long Island.

"The Northeast Corridor, South Florida, big midwestern cities, and the West Coast will suffer the biggest price declines," Moody's writes. "Counties such as Westchester, NY, Cook IL and Delaware PA will experience double-digit price declines."

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