tag:dreamwidth.org,2017-04-29:3173758 essentialsaltes essentialsaltes 2017-11-02T21:49:42Z tag:dreamwidth.org,2017-04-29:3173758:946936 2017-11-02T21:49:42Z 2017-11-02T21:49:42Z public 0 The<a href="http://www.latimes.com/politics/la-na-pol-gop-tax-cuts-20171102-story.html"> House tax bill </a>would lower the cutoff from $1 million to $500,000. That is, people with home loans bigger than $500K would not be able to deduct the interest from their income.<br /><br />Doesn't really affect me. Or does it? Duh duh DAH.<br /><br />The change doesn't affect current loans, so it doesn't affect me.<br /><br />My loan isn't over $500,000, so it doesn't affect me.<br /><br />But, and I know many of you will have to ready your tiniest stringed instruments for this, someday we may sell this place and property values being what they are, the new owner <strong>will </strong>be affected by this change, and it could have an effect on the price we realize.<br /><br />Let's take an extreme case, how screwed is the person who finances $999,999 on their new house? How big is the deduction they're losing?<br /><br />If they finance that jumbo loan at 4%, that's $40,000 of interest in the first year, which they'd be able to subtract from their income.<br /><br />Looks like the new marginal tax rate for income between $45K and $200K is 25%, which is very convenient, so I'll use it. So that $40K of interest saves them $10K in taxes. And the next year it would save them almost $10K, as they ever so slowly pay the loan off. Except that that deduction is going to vanish. So the tax change is gonna cost them $10K a year, and total well over $100K over the loan.<br /><br />How does that affect home prices? Hard to say. I don't know if many homebuyers explicitly consider the interest deduction, but I have no doubt the lenders do when deciding how much house people can afford.<br /><br />It's going to affect people's abilities to buy homes right in the range where the median Los Angeles home buyer is buying. (And where the median home seller is selling).<br /><br />(Our poor sucker will also get hit by the change to property tax deduction. The new plan limits it to $10K. In CA, property taxes total a bit over 1%, so that $999,999 house will have property taxes over the $10,000 limit.)<br type="_moz" /><br /><br /><img src="https://www.dreamwidth.org/tools/commentcount?user=essentialsaltes&ditemid=946936" width="30" height="12" alt="comment count unavailable" style="vertical-align: middle;"/> comments