Homeowners and future buyers in the Bay Area, where real estate prices are astronomical, could be hit the hardest by the new Republican tax law that limits how much mortgage interest, as well as local and state taxes, residents can deduct from their federal taxes.
The new tax law signed by President Trump on Friday limits the mortgage interest deduction to $750,000 for new home purchase loans made after Dec. 15. Current mortgage holders are grandfathered in and allowed to continue to take the previous $1 million deduction.
The state and local tax deduction is capped at $10,000, which in California -- where property taxes are less than the national average but state income taxes are high -- could cost wealthy and middle-class taxpayers and homeowners.
About a third of Californians in 2015 used the state and local tax deduction, which had no limit. The average amount claimed was $18,438, according to the Tax Policy Center.
“When you get into the higher incomes, there is a big impact,” said Walter Zhovreboff, administrative director with Bay Area Affordable Homeownership Alliance. “The lower incomes, I don’t think the deduction of interest and taxes is that detrimental.”