As part of their attempt to overhaul the federal tax system, the GOP and Trump administration are writing legislation that would place new limits on the home mortgage tax deduction—one of the longest standing benefits for homeowners. The move would help offset revenue that would be lost by cutting corporate and personal tax rates.
Tax change could be one-two punch for California homeowners
Such a cut would have the biggest effect on owners in expensive urban centers around the U.S., as well as most of the West Coast, where home prices are among the highest in the country, according to The Los Angeles Times. This proposal is on top of another anticipated change in the tax code that would hurt Californians more than residents in any other state—the ability to deduct state and local taxes from federal taxes.
Facts at a glance
- The GOP wants to cut in half the amount of mortgage debt homeowners can deduct, from $1M to $500,000.
- If that happens, 2.4% or nearly 490,000 Californians would see higher tax bills, a higher percentage than any other state.*
- Nationally, 1.4 million taxpayers, about 0.8%, would pay higher taxes, with an average increase of $3,100.
- The cut would raise approximately $300 billion in revenue by 2027.
- Most Americans would not be affected by the change, because they either rent, own their home, have a mortgage of less than $500,000, or don’t itemize deductions.
- Opponents of the tax change include the National Realtors Association, the housing industry and those who also want to cut the deduction, but earmark the funds to build more affordable housing.
How would measure affect home buyers?
Almost one-third of buyers in Southern California would find it tougher to buy a home, according to Geoff McIntosh, president of the California Association of Realtors. He said, “If Congress were to move forward with a cap on the mortgage interest deduction for loan amounts up to $500,000, a quarter of California’s home sales would be impacted, and those home buyers would end up paying more in taxes.”
*According to an analysis by the Policy Tax Center
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