California home-buyers could face difficulty in new tax plan - KSBY.com | San Luis Obispo and Santa Barbara Area News

California home-buyers could face difficulty in new tax plan

Posted: Updated:

The tax plan unveiled by Republican lawmakers last week is causing concern for many, including California realtors. Many say the plan may make it even more difficult for someone to buy a home on the Central Coast.

Two of California's popular tax breaks are at risk in the proposed overhaul of the current tax code. The first says taxpayers would no longer be allowed to deduct state and city income taxes from their federal tax bill. Another change has to do with reducing the cap on the mortgage interest deduction, which essentially allows people to deduct the interest on their mortgage debt. The tax overhaul could mean losing that deduction, which saves homeowners thousands of dollars each year. A group of local realtors said this could be bad for the housing market.

"If we lose the mortgage interest deduction, it will make it more difficult for people to buy homes. They are going to have to be dealing with the higher prices yet they are going to have less spendable money in their pocket. It's going to make it harder for them to buy," said Jack Hardy, president and CEO of Century 21 Hometown Realty in Pismo Beach.

The bill as written would reduce the mortgage cap to $500,000 from $1 million today. That would mean if you get a mortgage for more than $500,000, anything over that would not be tax deductible.

The change would help a lot of homeowners in states where homes aren't so pricey but coastal California homes are expensive, so the ability to write off mortgage debt in California is a huge incentive to buy.

"There is low inventory all over the California housing market. We don't have enough homes to sell," Hardy said.

Prices have already soared 40 percent in the last five years in San Luis Obispo County, according to Century 21 Hometown Realty Group.

"We are very, very close to our all-time high, which we reached in late 2005-2006," Hardy told KSBY News. "So if we don't get that deduction, it's going to make it more difficult for new buyers to come in."

The tax reform plan is just a plan. Nothing is set in stone yet as more negotiations are to come. The real estate lobby has already begun lobbying against the deduction take-aways.

President Trump has said he'd like to deliver the tax cuts in the bill to Americans as a holiday gift. But first, the bill has to pass the House Ways and Means Committee, then the full House, and then the Senate.

Top Trending Videos

Doppler Radar
Powered by Frankly

© KSBY.com 2018, KSBY.com
All rights reserved
Privacy Policy, | Terms of Service, and Ad Choices

Can't find something?