House plan would limit home mortgage tax deduction to $500,000
Legislation seen threatening home ownership ‘American Dream’
Property owners in California, Florida and New York have the most to lose if Congress limits tax deductions for interest payments on home mortgages, according to a Bloomberg analysis of Zillow data.
Assuming a 20 percent down payment, the three states together are estimated to have more than 80,000 homes currently listed for sale where the mortgage could reach at least $500,000, the limit laid out for new home sales in the House Republican tax plan. In California, that’s 44 percent of homes on the market.
Colorado and Massachusetts follow with one third of the number of homes on the market. Hawaii, though it has fewer homes for sale than California, New York and Florida, could see a high percentage of mortgages that would be affected by the proposed cap — more than half.
On Congress’s doorstep, nearly three quarters of Washington, D.C.’s homes would be affected by the House proposal, which halves the maximum amount of a mortgage on which homeowners can deduct interest payments, from the current $1 million cap. Existing mortgages would retain the higher cap. A competing Senate plan would retain the $1 million limit.
The House bill “would place the American Dream further out of reach for millions of Americans,” Elizabeth Mendenhall, president of the National Association of Realtors, wrote in a letter to House members in November.
In New York, 38 percent of homes on the market boast sale prices that are at or above the $500,000 mortgage limit. In Florida, 21 percent of for-sale homes would exceed the House limit.
On the other end of the scale, states with less expensive housing stock — such as Iowa and West Virginia — would be least affected. In these states, only 3 percent and 3.6 percent, respectively, of homes on the market will trigger the $500,000 mortgage cap on interest deductions.