Homes for Sale

Saturday, November 4, 2017

Trump Tax Bill change in Mortgage Interest Deduction Creates Almost No Impact on Los Angeles Real Estate


 

Mortgage Interest Deduction Change May Cause Small One Time Effect for Homes Valued Between $1,000,000 and $1.3M


Don’t believe the scare headlines. The proposed change in the mortgage interest deduction from a cap of $1,000,000 to $750,000 for new loans will have almost no impact on prices of homes in the Los Angeles area. It is true that California will be impacted more than almost any other area in the US., but the impact will be modest, to say the least.

Under current tax law, the mortgage interest deduction is capped at $1,000,000 of loan outstanding. If you have a loan with a balance of $1,200,000, you are not able to deduct the interest on the $200,000. If the interest rate is 4%, you would effectively not be able to realize $8000 per year of deduction, due to the cap. This taxpayer is likely to be in the 33% tax bracket, so the actual cost per year would be $2667 per year.

Under the new rules, the mortgage interest deduction cap would drop to $750,000.  In the worst case scenario, someone buying a home under the new tax plan that required a $1,000,000 loan would now lose the deduction on $250,000 of interest. Again, if we assume 4% interest, that would be $10,000 per year, and if the taxpayer was in the new 35% bracket, the actual out of pocket cost would be $3,500 per year or about $300 per month. So, in the very worst case scenario, the $300 per month difference would mean this individual might now only be able to afford a $1,200,000 home instead of a $1,250,000 home.

It is likely that there will be some impact on homes between $1,000,000 and $1,300,000. However, the impact will be a one-time event.

If you would like to review the impact of the new tax bill on your plans with regards to buying or selling residential real estate in California, please call Whit Prouty today for a closer look at your exact situation. Call 310-777-6302

4 comments:

  1. If you need any credit or money support then you can visit mortgage lenders whitby because in this bad time only they can help you by providing the best rates for loans. Even when you are suffering with bad credit situation mortgage brokers will handle the matter.

    ReplyDelete
  2. Well, if you can manage to find the best mortgage lenders then it will become so easy for you to get the loan easily. Again you can visit mortgage brokers near me whitby and there is no doubt that from that place you can get all highly experienced and professional mortgage brokers who are actually very good at financial advising.

    ReplyDelete
  3. Superb information article. Thank you . The travelers need to fill up the Kenya online visa application form to get the Kenya visa. Therefor, if the apply online, will get the fastest visa services with 24 hours customer support.

    ReplyDelete
  4. It is a great pleasure to read your message. I like it because it contains a lot of information I'm looking for and I like to comment The Turkish visa application form can be filled online from virtually anywhere in the world, so visitors from anywhere in the world can obtain their visa via email.

    ReplyDelete