Based on the new tax law, there is no change for capital gains on the sale of a home and deductibility of interest paid for a second home. However, the new law affects the deductibility of mortgage interest and real estate taxes:
– New mortgages are capped at $750,000 for purposes of home mortgage interest deduction, down from $1 million today.
– State and local tax deductions remain in place, but are capped at $10,000 for state and local sales, income and property taxes.
NAR conducted an analysis to identify which metro areas will be most affected by the above provisions. For each metro area, we calculated the share of homes with mortgages that are worth over $750,000 and share of owners who paid more than $10,000 for real estate taxes. The map below shows how many homeowners will be impacted by the new tax law for 382 metro areas (the darker the color, the higher the impact is):
Based on the data, the new tax law will have a higher impact in metro areas that already deal with affordability issues such as San Jose, CA and San Francisco, CA. Homebuyers were able to deduct up to $33,260 from their taxable income as a result of the mortgage interest deduction. However, under the new law, homebuyers are now able to deduct up to $24,945. On top of the mortgage interest provision, owners in these areas will be able to deduct up to $10,000 for real estate taxes. In San Jose, CA, 25% of owners paid over $10,000 for real estate taxes in 2016. Although the real property tax in California is less than 1%, a typical home in San Jose area is worth almost 1.2 million. Thus, both provisions will affect owners in less affordable metro areas. Furthermore, the provision of the property tax will affect owners in metro areas where property taxes are high such as New York, NY, Bridgeport, CT and Trenton, NJ.
 However, subject to the limit of $750K
 The new tax law will go into effect on Jan. 1, 2018.
 Interest paid in the first year
Powered by WPeMatico