House Republications have released the details about the proposed tax plan with complete overhaul of the taxes. Let’s look into what the changes related to mortgage interest deduction mean to homeowners in San Francisco Bay Area especially.
What is Mortgage Interest Deduction?
Mortgage interest deduction allows homeowners to reduce their taxable income by the amount of interest paid on the home loan. This deduction is only applicable if you itemize deductions. Most homeowners in the Bay Area who have mortgages uses this deduction.
What are the proposed changes in the mortgage interest deduction?
Currently, a homeowner can deduct interest on the home loan unto $1M and with the proposed change this limit would be reduced to $500K. Bay Area homeowners are affected most by this proposed change as the house prices here is significantly more than rest of the US in general.
The median home price in Bay Area is closer to $800K so most homeowners have mortgages greater than $500K and would easily cross the reduced limit under this proposed tax plan. This would reduce the overall deduction that homeowners currently use and can increase the overall tax for homeowners in Bay Area compared to the homeowners elsewhere in US.
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