Last week, the White House released the outlines of the long-awaited Trump Tax Plan. The proposal has been characterized as “tax reform,” but the President himself describes it more simply as a series of tax cuts. The plan is purportedly designed to lower taxes on the middle class and put more juice into the economy.
Many California home owners have been concerned with the elimination of the mortgage interest tax deduction. The good news is, Trump’s tax plan doesn’t eliminate that deduction. However, it does eliminate other deductions that are more important to California home owners.
Major Deductions Eliminated
Specifically, the Trump tax plan will eliminate property tax and state income tax deductions. These are substantial deductions which have reduced the amount of federal taxes paid by Californians for decades. Under Trump’s proposed tax plan, these deductions (and most other deductions used by folks who itemize them on their tax returns) go away.
While the Trump plan does eliminate these major deductions, the plan’s proponents will point to a doubling of the standard deduction – from $6,000/$12,000 to $12,000/$24,000 (single filers / joint filers). This will help lessen (or eliminate) the pain of the loss of these significant deductions for home owners in lower-cost states. But most home owners living in high cost states will be taking a big hit under Trump’s tax plan.
California Home Owners Will Lose Out
The National Association of Realtors (NAR) estimates that the average U.S. home owner will be paying an additional $851 per year in federal income tax. This is hardly the middle class tax cut that many had been expecting to see. And of course, California home owners will be paying significantly more than the U.S. average – likely two or three times more.
Chillingly, the NAR and CAR (California Association of Realtors) are estimating that if the Trump tax plan comes into effect, home prices could drop by 10% or more. This means California home owners stand to lose billions of dollars in equity with the stroke Trump’s pen.
Of course, there’s a lot more to the Trump tax plan. You’re welcome to download a copy of it here from this web site. With different tax plans, there are always winners and losers. In this case, the losers are clear: home owners in states with high property values and high income and property taxes. States like California, New York, Massachusetts, and Hawaii – none of which voted for Trump, so there will be little political cost for him.
I encourage everyone reading this to contact your Congressman and U.S. Senators. Let them know how you feel about Trump’s tax plan. For California home owners in particular, there is a great deal at stake with this proposal. It’s early days in this “tax reform” process, and much will be subject to change. Please help to make sure that the changes will be better for California home owners. Your family and your future are depending on it.