As part of the “fiscal cliff” discussions, both Congress and the presidential administration are discussing cutting mortgage interest and local property taxes on homes in Encinitas and across the country. These potential cuts (and they are only potential cuts at this point) could have a significant effect on the value of Encinitas homes.
There is much debate over whether or not these potential cuts could have a significant effect on home values and what individuals it will affect the most. Here are some of the facts and points regarding the possible cuts:
- According to the chief economist at NAR (National Association of Realtors) these cuts could trigger declines in home values of up to 15%.
- As of this moment no one on either side of the negotiation table has discussed eliminating property tax write-offs or mortgage interest; discussions have revolved around potential caps.
- The proposed cuts would directly affect upper-income taxpayers (specifically those individuals that take in more than $200,000 or married couples that joint-file for an adjusted gross income of $250,000). Deductions would potentially be capped at the 28% marginal bracket level.
- A potential scenario was run where taxpayers in the 33% bracket had mortgage deductions limited to 28% and found that housing values decreased anywhere from 6.9% to 15%.
You can visit the LA Times article for more information on the potential negative effects of limiting real estate deductions.