Today, we have urgent business to discuss. This is something that I promise will affect every homeowner in California. I’m talking about the new tax bill that was just signed intolaw before the holidays. Now please understand me here. If I sound like I’m concerned, it’s because I am. I’m concerned for our community and I want to help. I’m not making any type of commentary on anything other than how this bill specifically affects our local homeowners and, of course, my Real Estate clients. Here’s what we know so far.
According to the National Association of Realtors, the new bill could cause a drop in California home prices by 8 – 10 percent. Why is this? Well there are two items in the bill that are problematic for homeowners.
MORTGAGE INTEREST DEDUCTION
The first key provision is the mortgage interest deduction. Now, the mortgage-interest deduction has long been considered a sacrosanct pathway (in other words, hands 0ff) to the American dream of owning a home. In the new tax bill there is a cap of a $750,000 mortgage-interest deduction. For homeowners in most states this is no big deal, but here in California where values often exceed $750k it’s a big issue.
If you have any questions about the tax bill or your current home value, please click below and I or someone from my team will be in touch shortly.
STATE AND LOCAL TAX DEDUCTION CAP
Currently, taxpayers can deduct what they pay in state and local property, income, and sales taxes from their federal returns. This is no longer the case. The new law caps these deductions at $10,000. What does this mean? If you live in California, particularly if you’re a homeowner, this could have a huge impact on your final tax bill. I know what you’re thinking, even with the promised tax breaks? Sorry, the answer is yes.
My biggest concern in light of the new tax bill is for the 50+, particularly retired, Homeowners and homebuyers.
- First, if home prices drop and an aging adult would like to downsize or needs to move into an assisted living facility, he or she will have fewer assets to offset the cost of their retirement.
- Second, if he or she would like to offset the cost of retirement with a reverse mortgage, less favorable terms will be offered.
- Third, if a retiree is living on a fixed income, lost deductions resulting in a much higher tax bill, would be devastating.
These are challenging times for Californians, but if we stayed informed we could create a strategy that protects us from painful losses. This is where I come in. Please if you need and assistance or have any questions about selling your home click below and leave your information. I, or someone on my team will be in touch shortly.