Brokers have been busy parsing the statement of principles issued in the spring by U.S. Treasury Secretary Steve Mnuchin announcing “a massive tax cut for businesses and massive tax reform and simplification.”

Brokers and real estate professionals from all corners of the industry have spent a good part of their busy season trying to predict what will actually happen with the federal tax code and how it will affect their clients. Yet, there isn’t a real consensus in the community despite Mnuchin’s promise that the mortgage interest deduction will remain intact. Under the statement, mortgage interest and charitable giving are the only two deductions being kept in the plan.

But while all agree that the mortgage interest deduction is a critical federal policy that incentivizes home-buying activity for millions of Americans each year, there are concerns that other major changes to the tax code—such as the doubling of the standard deduction—could render it useless. According to the National Association of REALTORS®, the plan would “impact the demand for owner-occupied housing by reducing the number of homeowners who claim the mortgage interest deduction, eliminating the itemized deduction for property taxes, and decreasing marginal tax rates.” As a result, home values could drop 8 to 12 percent in the short-term depending on the regional market, concluded the NAR report, which was backed by a financial review conducted by auditing giant PricewaterhouseCoopers.

Sam DeBord, managing broker of Seattle Homes Group and vice president of strategic growth for Coldwell Banker Danforth, does not think the comprehensive tax overhaul would benefit the housing market or the local communities that depend on those tax revenues. This is mainly because most won’t claim the itemized mortgage interest deduction, instead opting for the newly doubled standard deduction, which blocks taxpayers from claiming specific items such as mortgage interest.

“As for the proposed tax reforms from the administration, the mortgage interest deduction is not protected,” says DeBord. “The standard deduction would be altered to the point that it would take away 90 percent of mortgage interest deduction users’ ability to claim the deduction. It would remove the incentive to invest in real estate, which we know is most Americans’ primary route to wealth-building and retirement savings. Disincentivizing homeownership and investment in real estate is bad economic and social policy.”

He adds that such a move would also disrupt the plans of former homebuyers who made their real estate investments based on the financing equations dictated by the mortgage interest deduction.

“There are 35 million households who have purchased homes under the promise of the mortgage interest deduction and are claiming it today,” DeBord explains. “Changing the law now would be pulling the rug out from under the budgeting decisions they made based on current tax policy.”

With the mortgage interest deduction all but neutralized for so many homeowners and potential buyers, brokers are looking to other parts of the comprehensive tax reform to find new wealth-building strategies for their clients. One aspect getting a lot of attention is the plan’s removal of the alternative minimum tax (AMT)—a mechanism that was initially implemented to make sure high net-worth taxpayers couldn’t avoid paying their fair share, but has become more of a burden on the upper-middle class instead.

Michael Schaffer, broker/owner of Reason Real Estate in Denver, Colo., noted that the elimination of the AMT could boost the market for second homes even if price increases are slowed by the dilution of the mortgage interest deduction at the entry level.

“The big things that impact real estate are the (elimination of the) alternative minimum tax and doubling the standard deduction. They are really the only things that matter, assuming that the mortgage interest deduction remains as it currently stands,” Schaffer says.

Schaffer predicts that high-income earners will see a major benefit with the removal of the AMT, which will encourage them to borrow the maximum allowable against their home. With current deductibility being limited to the first $1 million of home purchase debt—including the primary residence and up to one additional home, as long as the second home is not an income property—the interest rate will effectively be subsidized by the tax deduction, which Schaffer says can free up funds for more second homes or vacation properties, as well as larger loans on personal residences.

“An effective strategy for an individual high earner would be to draw the maximum on a conventional mortgage on their primary residence and then an additional conventional mortgage on a second home up to the limit or a total of $1 million between the two properties,” Schaffer says. “If the two properties together don’t cross the $1 million line, a home equity line of credit can be drawn for up to $100,000 on either of the properties, and all of the interest will be deductible on all three loans.”

For the lower end of the market, however, Schaffer said there could be more of a shift toward renting, and construction will likely shift from building entry-level single-family homes toward move-up luxury homes, second-home condominiums, and multi-family rental units.

At the high end of the market—or regions such as Southern California, where middle-market homes can hit $1 million without even including air conditioning—the upside of that analysis has a relatively low ceiling, which has luxury agents like Chad Rogers keeping a close eye on the proposed elimination of state and local real estate tax deductions.

“The proposed change will negatively affect the federal income tax bill for residents in high-tax states such as California, New York and Illinois,” says Rogers, a celebrity real estate expert with Hilton & Hyland.

Rogers sees the elimination of the AMT as a positive for real estate, and he’s reassured by the administration’s desire to keep the mortgage interest deduction. However, he says many successful brokers in his market (where the MLS reported 51 closed sales of over $10 million in the first four months of 2017) stand to benefit the most from the pro-business provisions of the plan—mainly the reduction of the corporate tax from 35 percent down to 15 percent.

“The lowering of the tax rate to 15 percent for income from pass-through entities, such as from partnerships, S-corporations and LLCs, may result in significant tax savings to the high-income-producing broker,” Rogers explains, encouraging self-employed brokers to check with their CPAs about creating pass-through entities that will help their businesses.

Andrew King is an award-winning journalist with 15 years of experience with the Gannett newspaper company, appearing in The Journal News (Westchester, NY), Asbury Park Press and USA Today. He also contributes to The Real Deal, TheLadders.com and TechPageOne.com.

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