We all know how important the home mortgage deduction is, and as far as our tax attorneys can tell, it should be safe for the foreseeable future — even though there’s an upcoming tax reform debate.
However, this deduction doesn’t need to be completely revoked by lawmakers in order to be deemed useless by homeowners and taxpayers in San Francisco.
It seems as though lawmakers are currently trying to replace the cash flow that they would ultimately lose as a result of the trillions of dollars in tax cuts they would like to make. As a tax attorney in San Francisco, I can tell you that the mortgage deduction is one of the most expensive tax breaks we have in America. The estimated cost for the next decade is in excess of $80 billion a year.
As the law stands today, San Francisco homeowners that itemize deductions may deduct the interest they pay on their mortgage, up to one million dollars between a primary residence and secondary property. You may also deduct loan interest from home equity loans, up to $100k, as long as you’re not subject to the Alternative Minimum Tax. Seeing as how the median price for a home in San Francisco is over one and a half million dollars, these deductions are absolutely critical for home owners in the bay area.
What’s the average price of a home for the rest of the country? Not as much as you might think. A paltry $250k is the median price for a home in the United States.
So what kind of salary do you need to be pulling down in order to be a home owner in San Francisco? It’s estimated that you would need over $180k in order to own a home and make ends meet.
Under our current tax law, a lot of the expenses associated with home ownership are deductible. Eliminating these deductions could cause a hardship on San Francisco residents who rely on them in order to maintain their budget.
Of course, you don’t need a tax lawyer to tell you that any change to the mortgage deductions could cause a disruption to the housing market. In fact, the National Association of Realtors predicts that eliminating tax incentives for home ownership could cause home values to plunge across the country.
It’s been reported that we may see even more eliminations of itemized deductions that would significantly decrease the tax benefits of owning a home.
We’ve also seen reports that lawmakers are trying to increase the standard deduction, which would greatly reduce the amount of people who would itemize their deductions.
It’s important to remember that none of these laws are set in stone yet. Lawmakers are beginning to debate about what the upcoming tax reform would look like, and our tax attorneys want to make sure that the public is well informed a head of time so that you can have an informed opinion, and let your representatives know how you feel about the potential changes.
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