The new version of tax reform bill was released on Friday, Dec 15th. In this 500 page bill, there are some changes that will have negative impacts on homeownership if it’s voted through by both Houses of Congress next week.

Limiting the mortgage interest deduction (MID) from – the current – $1 million to $750,000 on mortgages for the first or second home, will affect homeowners in high-tax states like California, New York, New Jersey, Maryland, Massachusetts and Illinois. Chief Economist, Nela Richardson, the lead of housing market research team on data reports at Redfin, published an article a few days ago and made some predictions for housing in 2018. According to her, if state and local tax (SALT) deductions are eliminated, people living in aforementioned states will consider moving to other states where they can get more for less money.

Other modification that may affect housing market in 2018, based on Nela’s predictions, is new residency requirement for home sellers to benefit a tax deduction from sale proceeds. Currently, “single homeowners can exclude $250,000 of sale proceeds from capital gains taxes as long as they’ve lived in the home for two out of the previous five years. Couples can exclude up to $500,000. However, the new proposal increases the number of years to five of the previous eight years, in order to deduct gains.” Nela predicts this to cause homeowners staying longer in their homes if this tax bill get voted.

C.A.R. – CALIFORNIA ASSOCIATION OF REALTORS® – is calling all California Realtors to join the effort to continue to oppose this bill to boost homeownership in California.

Click here to read Nela’s predictions for 2018.