House Republicans revealed their latest tax plan on Thursday, calling for a tightening of deductions and loopholes, as well as a corporate tax break, the Los Angeles Times reported.
For California homeowners, the biggest blow could stem from the change on mortgage interest deductions. If approved, mortgage interest deductions would be limited to new loans of no more than $500,000, down from the current $1 million, and deductions for second homes would no longer be allowed. Property tax deductions would also be capped at $10,000.
The proposed bill could dramatically impact high-cost states like California, whose mortgages routinely exceed the $500,000 GOP threshold. Roughly 56.6 percent of the loans acquired in San Francisco exceeded $500,000 from 2013 to 2015, according to the National Low Income Housing Coalition. In Los Angeles, that number is a bit lower at 23 percent.
At the center of the bill, however, lies Republicans’ plan to ease the corporate tax rate from 35 percent to 20 percent. That will add an estimated $1.3 trillion to the federal deficit over a period of 10 years, and thus explains why the federal government is seeking greater cash inflow from individuals.
And the opposition is already speaking up, arguing against the bill in fear of it harming the already-struggling homeownership statistics in the Golden State.
“Eliminating or nullifying the tax incentives for homeownership puts home values and middle-class homeowners at risk, and from a cursory examination, this legislation appears to do just that,” William E. Brown, president of the National Assn. of Realtors, told LAT. Nancy Pelosi, House Minority Leader, called the bill “devastating” for California.
Aside from affecting mortgage payments, the 429-page bill would also eliminate other popular deductions including alimony payments, adoptions, dependent care programs, medical savings accounts and moving expenses. It calls for a full repeal of the estate tax by 2024. It would also streamline individual rates from seven brackets to four. [LAT] – Natalie Hoberman