LOS ANGELES, Nov. 20, 2017 /PRNewswire/ -- The start of 2018 could bring big changes to the way Americans file taxes. This is especially true for those thinking of purchasing a home since some of the tax benefits of buying are under scrutiny.
Analysis from all-in-one homebuying service Open Listings shows that the proposed Tax Cuts & Jobs Act will impact most potential homebuyers living in major metro areas where property values are often higher than the $500,000 mortgage debt limit set by the new tax plan.
Homebuyers living in competitive markets, especially first-timers with FHA or VA loans who carry higher mortgage loan debt heavily benefit from the mortgage interest deduction.
For them, lower mortgage tax deduction limits with the Tax Cuts & Jobs Act could mean rising homeownership costs. This especially hits hard for California homebuyers.
According to the Open Listings database, 48.4% of all active listings in California from the past 30 days are over $500,000. This number skyrockets in metro areas like Los Angeles, where that number is 68.9%, and San Francisco, where 94.6% of all active listings are over $500,000. Read more here.
As it stands, the Tax Cuts & Jobs Act:
- Cuts mortgage debt write-offs to $500,000 (currently $1,000,000.)
- Limits the amount of property taxes you can deduct to $10,000
- Eliminates your ability to deduct state and local taxes
For homeowners, these write-offs can amount to thousands, especially in the first few years of homeownership when mortgage interest is at its highest.
Those who buy a home under this proposed tax plan will likely find that the cap to the mortgage deduction leaves them doubly-taxed if their loan is over $500,000. The same is true with the cap on property taxes.
The bottom line
Right now, there's no way to tell if the "Tax Cuts and Jobs Plan" will get through the Senate. But, if it does, some of the longheld tax benefits of buying will no longer be available to new homeowners.
While only potential buyers and their financial advisor can ultimately make the decision if buying a home is the right choice, the next few weeks may be a good time for buyers thinking about getting into the market, as the proposed tax plan will not affect mortgages originated before it passes.
Contact: Angeline Vuong, 747-444-1482, [email protected]
SOURCE Open Listings