What the new tax plan means for Los Angeles area home buyers and sellers

Unless you've been doing last-minute holiday shopping 24/7, you know that the U.S. Congress passed a new bill that governs the federal taxes that you pay.  Without getting deep in the weeds about the details, here are the major issues that you should know about if you are searching for a home or selling a home in the Los Angeles area.

Re the mortgage interest deduction: it has been lowered from $1 million to $750,000.  That's the amount of the mortgage loan, not the total cost of the home.  Mercifully, it will not hurt affordability for most people who buy a home in the $400,000-$900,000 range -- and most properties in L.A. County are in that range -- so your MID is safe.  What does it mean for sellers? Not much. Your pool of qualified buyers will not shrink for median-priced homes and townhomes/condos.  And, if you are selling a very expensive property, your buyers are probably not as concerned as they already (presumably) have ample means to pay the mortgage and don't require a big yearly deduction.

Re the capital gains on home sales exclusion:  This is unchanged.  If you are a single person who has lived in your home two out of the last five years, you can still exclude up to $250,000 in profit from capital gains taxes.  If you are married, you can exclude up to $500,000 in profit.  For buyers, no concerns here.

Stay tuned, though.  I have a feeling that the U.S. Congress is not done tinkering with this tax plan yet.