Many Californians face a big financial hit under the Republican tax plan, which would eliminate a major tax break that benefits state residents more than those anywhere else in the U.S.
The federal deduction for state and local taxes allowed Californians to reduce their taxable income by $101 billion in 2014, according to an analysis by the nonpartisan Tax Foundation.
The plan also left open the possibility of another big hit: new limits on the deduction for home mortgage interest, which would have a greater effect on states with higher housing costs, such as California and New York.
Homeowners now can deduct interest paid on as much as $1 million in mortgage debt. Some Republicans have been considering reducing the limit to $500,000. If that were to happen, about 489,000 filers in California would see an average increase of about $3,290 in their federal taxes, according to an analysis by the nonpartisan Tax Policy Center.
The Republican tax outline would slash business tax rates, nearly double the standard deduction for individuals and married taxpayers filing jointly, and compress the current seven tax brackets to three. But the plan still lacks many crucial details.
That made it difficult to analyze the effect on the nation, let alone specific states, experts said. The plan, for example, doesn’t specify the income levels of the new tax brackets. Those details and others — such as whether to limit the mortgage interest deduction — are being left to members of Congress to figure out.
The federal deduction for state and local taxes allowed Californians to reduce their taxable income by $101 billion in 2014, according to an analysis by the nonpartisan Tax Foundation.
The plan also left open the possibility of another big hit: new limits on the deduction for home mortgage interest, which would have a greater effect on states with higher housing costs, such as California and New York.
Homeowners now can deduct interest paid on as much as $1 million in mortgage debt. Some Republicans have been considering reducing the limit to $500,000. If that were to happen, about 489,000 filers in California would see an average increase of about $3,290 in their federal taxes, according to an analysis by the nonpartisan Tax Policy Center.
The Republican tax outline would slash business tax rates, nearly double the standard deduction for individuals and married taxpayers filing jointly, and compress the current seven tax brackets to three. But the plan still lacks many crucial details.
That made it difficult to analyze the effect on the nation, let alone specific states, experts said. The plan, for example, doesn’t specify the income levels of the new tax brackets. Those details and others — such as whether to limit the mortgage interest deduction — are being left to members of Congress to figure out.