GOP tax plan would be devastating to California homeowners
This is in response to the recent article stating that the new tax plan wouldn't hurt real estate that much. (GOP tax plan may not be so bad for housing after all, analysts claim)
I 100% disagree with that assessment.
This plan would be devastating for any homeowner here in California that has a property tax bill over $10,000, or for anyone that would want to buy a house over $800,000 (the tax bill is about $10,000 at that price point).
If someone buys an expensive house in Beverly Hills, let's say for $20,000,000, the taxes would be about $260,000. If they can only deduct $10,000, then the other $250,000 that's not deductible would cost that taxpayer about $100,000 in additional taxes. How is that a benefit?
And capping the mortgage interest deduction at $500,000? That would cause anyone that wants to buy a house over $600,000 (including a 20% down payment) to incur much higher tax bills.
For example, take someone who buys a $4 million house in a high-cost area like Venice, Mar Vista, Playa del Rey, Brentwood, Pacific Palisades, or Beverly Hills — areas with a lot of homes in that price range. The buyer makes a 20% down payment, or $800,000, and finances the remaining $3.2 million at a 5% interest rate.
Under the Republican tax proposal, the buyer would only be able to deduct the first $25,000 in interest — $500,000 x 5% = $25,000 — rather than $50,000 in interest deduction allowed under the current $1 million cap (a limit that I also object to).
Does this sound like a good idea?
Both of these tax changes could be devastating to California and other high priced states with high property taxes.
I have already written to both of my senators and plan to write to every senator in our country if I can find the time.
Very bad idea.
Attorney at Law
Real Estate Broker (BRE# 00614072)