Since 1913 families have counted on the Mortgage Interest Deduction to make homeownership more affordable.
AB 71 (Chiu) would eliminate the mortgage interest deduction (MID) for second homes to fund an increase in low-income housing tax credits. If the MID were eliminated for second homes, 2,152 home sales would be lost in the first year after implementation. The potential impact of the MID elimination is an economic loss of $180.2 million to the state of California in the year following the implementation.
Second homes are not necessarily “vacation homes.” Someone faced with a one-way commute of an hour or more may choose to purchase a small condo near where they work in which to live during the workweek.
The state shouldn’t change the rules after the fact. People made significant financial decisions, trusting that the mortgage interest deduction would be there to make the property affordable.
Local economies and communities will suffer. The economic health of the recreational areas of the state will be harmed by elimination of the mortgage interest deduction on second homes. Homeowners in those areas of the state are going to be hard pressed to find a buyer if the mortgage interest deduction on second homes is eliminated.
The MID is already capped. The amount of the mortgage interest deduction is already capped regardless of whether the taxpayer has one home or two homes. It's not right for government to dictate to homeowners how they can allocate their housing dollars!
If the legislature abolishes the MID for second homes, will YOUR home be next?
AB 71 will soon be considered by the Assembly Revenue and Taxation Committee.