The new tax law, which was signed into law at the end of 2017, will directly or indirectly affect most current and prospective homeowners. Those affected directly are mostly found in the higher-cost housing areas of the nation, and will find their mortgage interest deduction limited by a new maximum loan amount of $750,000, down from $1 million. There is also a cap on the deductibility of state and local taxes of $10,000. In addition, the great majority of homeowners will be indirectly affected by the tax act’s increase in the standard deduction, which will result in fewer than 10 percent of tax filers itemizing their deductions.
Which metros’ real estate likely will be most directly affected by the new law?
To determine this, NAR researchers calculated the share of homes with mortgages that are worth more than $750,000 as well as the share of owners who pay more than $10,000 for real estate taxes. (View an interactive map to see how many homeowners will be affected in the 382 metro areas that NAR studied.)
The five most affected metro areas, according to NAR’s analysis, are:
- San Jose-Sunnyvale-Santa Clara, Calif.
- San Francisco-Oakland-Hayward, Calif.
- Santa Cruz-Watsonville, Calif.
- Santa Maria-Santa Barbara, Calif.
- Urban Honolulu, Hawaii