There are plenty of arguments to go around about the GOP tax proposal currently working its way around Capitol Hill, but one thing seems pretty clear: If the bill passes as currently written, the changes will have a significant impact in California, and one of those impacts will be making it even more difficult to afford to buy a home here.
One of the most popular breaks in the current tax code is the mortgage interest deduction. Right now, the deduction applies to the interest on any mortgage of up to $1 million. The GOP plan would cap that limit at mortgages of $500,000. This probably seems like an easy sell in a lot of parts of the country where, as The New York Times reports, an average home costs just $200,000—but good luck trying to find a home for that price in Los Angeles (or San Francisco, San Jose, San Diego, or even Sacramento, for that matter).
And our market is bonkers expensive, right?
According to Zillow, the median home price in Los Angeles county is $633,400, and rising. Its data also suggests that 72 percent of homes available cost more than $500,000 (in the Bay Area, it might be as high as 94 percent). Which means that for the average local home-buyer, even if they’re able to afford a place in this market, they will find it more expensive because they can’t deduct the interest off their taxes. The non-partisan Tax Policy Center estimates that 21 percent of tax-filers currently take advantage of the deduction, and that the number could drop to four percent.
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