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News & Press: Industry News

House Tax Bill - Changes to Mortgage Deduction and Exclusion of Home Sale Profits

Tuesday, November 21, 2017  
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California’s expensive housing markets face unfavorable changes under the recently released tax-reform bill. Mortgage interest would be deductible on loans up to $500,000 instead of the current $1 million for couples filing jointly. Many other Californians could see the value of the deduction diminished because itemization becomes less attractive if the standard deduction is doubled and state and local tax deductions are substantially reduced.

Both homebuilders and the National Association of Realtors have expressed concerns about the plan. The National Association of Home Builders estimates that a third of homes in California would be affected by the mortgage interest cap. Moody’s Analytics reported that the tax changes could initially cut prices by 10 percent in expensive markets and 3 percent to 5 percent across the U.S.

The plan also affects the home-sale exclusion which allows a couple to exclude up to $500,000 in capital gains from their gross income if they used their home as their principal residence for two of the past five years. Under the new plan, they’d need to use it as their principal residence for five of the past eight years to qualify. Also, the exclusion would only be available every five years instead of every two years. For high earners the exclusion would be phased out dollar for every dollar in cases where a joint tax filer’s adjusted gross income exceeds $500,000.


California Land Title Association


1215 K Street #1816 Sacramento, CA 95814-3905
Email: mail@clta.org  |  Phone: 916-444-2647  |   Fax: 916-444-2851