Updated July 27, 2017
AB 71 would end a tax break that allows homeowners to deduct the interest from the mortgage on their second home from their state taxes. About 31,000 Californians received the tax break last year. The bill would direct those funds to an existing program that finances low-income housing construction through tax credits.
If the MID were eliminated for second homes, 2,152 home sales would be lost in the first year after the 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.
We are opposing changing the mortgage interest deduction for the following reasons:
- 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.
- Second homes are not necessarily “vacation homes.” For example, someone faced with a one-way commute of an hour or more may choose to purchase a small condominium unit near where they work in which to live during the workweek.
- 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.
STATUS: In Assembly.
Questions? Please contact Victor Cuauhtémoc Gomez, Sr. Director of Public Policy at email@example.com
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