SACRAMENTO (CBS13) — House Republicans have released their proposed tax reform plan. It’s the first major tax overhaul in 31 years.
The plan would increase the standard deduction, as well as the child tax credit and reduce the number of income brackets.
It could also take a toll on the housing market in California.
It’s been a cherished tax deduction for homeowners nationwide. According to taxfoundation.org, in the Sacramento area, taxpayers deduct about $2,500 for their mortgages, but those deductions could be on the chopping block.
“What they give you with one hand, they take away with the other,” House Minority Leader Nancy Pelosi said.
Under the proposed GOP tax plan, mortgage deduction caps for new homes would be sliced in half from $1 million to $500,000.
For folks in a state with some of the nation’s highest home prices, losing the deduction would be a huge financial hit.
Gustavo Gonzales with Santa Clara Co. Association of Realtors said, “Look at the numbers! I mean, we are being punished because our housing is expensive. That’s not fair to any Californian.”
The blow is a bit softened for homeowners in the Sacramento area, where the average price of a home in counties including Sacramento, San Joaquin, Plumas and Yuba fall under $400,000. That’s according to real estate tracking firm, CoreLogic.
But, in some Bay Area counties where home prices average $1 million, it could force buyers out of the market. Real estate agent Jeff Bell says the plan not only takes away the tax deduction but forces buyers to pay an extra $5,000 a year out of pocket.
Bell said, “17 percent of people living in Santa Clara County can actually afford to buy a home. So, will $,5000 a year make or break a difference? It certainly can.”
The plan would also eliminate the second home deduction, so homeowners would only be able to deduct interest on their primary home. It keeps the property tax deduction but caps it at $10,000.