The Republican tax bill that appears headed for President Trump’s desk reduces the ability of home buyers to deduct mortgage interest, which will be a hit to home shoppers in Southern California and the Bay Area, where housing costs are sky-high.
But the interest provision is far more limited in scope than a previous proposal. Real estate experts and professionals said Tuesday that they don’t expect a big effect on home buying in the region, and that any ramifications will be largely restricted to well-to-do neighborhoods.
Under the new plan, which passed the House on Tuesday and was headed for a late vote in the Senate, buyers can deduct interest on mortgages up to $750,000, for homes bought after Dec. 15. (Homes purchased on that date or before then aren’t affected.) That’s down from the current $1-million limit, but an increase from a $500,000 cap that previously passed the House.
That means a home buyer with a 20% down payment can purchase a $930,000 home and still deduct all the interest. Even for a borrower who took out a $1-million loan at 4% interest, $30,024 of interest payments are deductible in the first year, leaving $9,656 that isn’t.
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