How does the Senate tax bill affect San Diego homeowners and those considering purchasing a home in the future? The recent version of the tax reform package passed by the US Senate has local real estate industry representatives, developers and real estate agents quite concerned. This isn’t over yet as the Senate version is much different from the House plan passed early last month. The Senate version allows Californians to keep our mortgage interest deductions as they stand today. The house version would lower that deduction to a limit of the interest on new mortgages of $500,000 or less going forward. How does this actually look in terms of San Diego’s real estate market?
The San Diego Tribune noted in a recent article there were just under 33,000 homes which have been sold this year in San Diego through the end of October 2017. Of those sales, only 3,651 or roughly 11% exceeded $1 million. However, there were almost 18,000 homes which sold in that same period for more than $500,000 representing 54.7% of San Diego home sales.
How does the Senate tax bill affect San Diego homeowners and those considering purchasing a home in the future? It may actually reduce the value of homes throughout San Diego. The ability to take a tax deduction for the mortgage interest is a significant factor in determining the amount of home you may qualify for. The additional threat of the loss of the ability to deduct amounts paid in California and local income taxes and property taxes reduces net income in each household. The reduction in net income will reduce the amount of the mortgage each buyer may qualify for throughout the San Diego region.
The house bill removes the ability to deduct student loan interest which removes up to $2,500 in additional revenue each year at tax time. Allen Barron’s integrated tax, estate planning, legal, accounting and business advisory services help our clients to make sound decisions while reducing their exposure to taxation. We are watching developments in Washington closely, and are prepared to help you and your family to develop and execute sound financial strategy for 2018 and beyond. We invite you to contact us for a free consultation at 866-631-3470.