The folks at JBREC have completed their own tax-reform study:
They say the high-earners who buy a million-dollar house are the losers, but those folks can still deduct the roughly $30,000 per year in mortgage-interest paid on a loan amount of $750,000 (though if they were renting previously they now have to pay property taxes).
Reasons for High-Earners to Buy a House:
- Deduct mortgage interest of $30,000 paid on your $750,000 loan (or higher).
- Secure where you are going to live over the next 5-50 years.
- Build equity with each payment.
- Gamble that the value will go up.
- Make the family happy.
Reasons for High-Earners Not to Buy a House:
- Have landlord pay property taxes, HOA, etc.
- Have landlord fix stuff.
- Stay flexible on where to live.
- Hope prices go down and buy later.
Numbers 1-4 on both lists probably offset each other, so the focus is on #5.
It looks like they’re ignoring the AMT, which is huge.
For anyone who was in AMT, they are likely better off under tax reform even with the SALT limits. And AMT was very common in our high-income NSDCC.
AMT also made a big difference in the marginal cost of home ownership, reducing the tax reform effect from ~$700/month to ~$450/month for a median price home.
Agreed these numbers are bunk. My household profile is nearly identical to the “San Francisco Bay Area” homeowner and our federal income tax liability went way down. I don’t know if it is changes to AMT (which we were always subject to before) or the changes to the child credits (we have two), but just screaming NO MORE SALT and MID while not addressing the other changes simply ignores the fact that there is a lot more in play.