This is my last column of 2017 and many readers have questions about how the new tax bill will affect them in California. Here are a few things you should discuss with your accountant or tax lawyer.
First, should you pay both installments of your property taxes because the deduction for state and local taxes will be capped at $10,000 in 2018? Many Californians pay more than $10,000 per year in property taxes. Another item you should discuss with your advisor is whether you should make an extra mortgage payment this year because next year the standard deduction will increase above the limit of many taxpayers’ total of deductions.
One change coming is that taxpayers will only be able to deduct interest on loans up to $750,000, down from the current allowable $1 million limit. This is only for new mortgages created after November 2, 2017. The average price in Menlo Park and Palo Alto is above $3.2 million so the reduced limit will have some effect.
It will take time to absorb what these changes mean for California real estate. Will home values be affected? It’s too soon to tell.