South Bay real estate belongs to the highest priced markets in the country. Therefore, the new proposed tax law will impact our homebuyers. Here is the information that summarizes the new tax law for South Bay and Beach Cities home buyers:
The property tax deduction will be lowered for almost 270,000 Southern California home owners, one out of every 15, if the U.S. House and Senate pass the latest version of the GOP tax overhaul plan, an analysis by Irvine-based Attom Data Solutions shows.
The mortgage interest deduction also will be lowered for an estimated 14,300 home buyers, or one out of every nine purchasers, the analysis shows.
The latest version of the tax bill caps deductions at $10,000 for property taxes and some other form of state or local taxes (sales or income). It also caps mortgage deductions for interest paid on up to $750,000 of debt on loans issued after the bill takes effect. Mortgage deductions would continue to be capped at the old limit of $1 million for existing home loans.
Attom analyzed this year’s home sales with mortgages greater than $750,000 as a guide to how many future buyers could be impacted by the proposed $750,000 mortgage deduction limit. It also calculated how many home owners pay more than the proposed $10,000 limit on property taxes.
Nationwide, the real estate data firm found 3.9 percent of future home buyers, or almost 99,000, face decreases in their mortgage interest deduction. More than 4 million of U.S. property owners, or 4.4 percent, pay more than $10,000 in property taxes.
Locally, Attom’s analysis shows high-cost Orange and Los Angeles counties both have significant numbers of property owners and potential future home buyers who could see reduced benefits from owning real estate. The impact in the Inland Empire would be much smaller.
The results show:
- Orange County: 17.3 percent of homes sold this year so far (4,450) had mortgages greater than $750,000; and 9.6 percent of property owners (78,011) pay more than $10,000 a year in property taxes.
- Los Angeles County: 15.5 percent of homes sold (9,197) had mortgages greater than $750,000; and 9.2 percent of property owners (165,078) paid more than $10,000 a year in property taxes.
- Riverside County: 1.7 percent of homes sold (458) had mortgages greater than $750,000; and 2.3 percent of property owners (18,094) paid more than $10,000 a year in property taxes.
- San Bernardino County: 0.9 percent of homes sold (190) had mortgages greater than $750,000; and 1.1 percent of property owners (6,345) paid more than $10,000 a year in property taxes.
In all, 10.8 percent of Southern California home buyers from those four counties face reduced mortgage interest deductions under the GOP tax plan, while 6.7 percent face reduced property tax deductions.
Impacts are even greater in other U.S. metro areas with higher property values.