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The housing industry is up in arms over the proposals, and shares of real estate brokerage firms such as Remax and Realogy have tumbled since the House version came out Nov. 2. But house hunters who have been priced out of the market might welcome any dip.

The bills have many moving parts that are likely to change as they work their way through Congress, but here are the provisions that would most directly affect homeownership.

Property tax deduction: Under current law, homeowners can take an itemized deduction for property taxes. The House version would limit this deduction to $10,000 per year for all homeowners starting next year. The Senate version released Thursday would eliminate it. Both versions would eliminate the deduction for all other state and local taxes, including income tax.

More on GOP Tax Bills

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  Taxes would rise for millions of Californians under GOP plan

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  California’s high taxes, costly housing mean trouble under plan

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  Republican tax plan would hit Bay Area home buyers hard

Mortgage interest deduction: Today, homeowners can deduct interest on up to $1 million in debt used to buy, build or improve first and second homes (acquisition debt). They can also deduct interest on up to $100,000 in home-equity debt (money borrowed against a home for other purposes, such as buying a car).

Under the House version, if you took out a home loan on or after Nov. 2, you could deduct interest on only up to $500,000 in debt on a primary residence. You could deduct no interest on a second home or home-equity loan.

Under the Senate version, you could still deduct interest on up to $1 million in acquisition debt on a first or second home. But you could not deduct interest on home-equity debt.

In other words, the House version reduces the mortgage interest deduction but leaves the property tax deduction mostly intact. The Senate version eliminates the property tax deduction but leaves the mortgage interest deduction mostly intact. These differences matter less than they seem because most homeowners who take one of these deductions take the other. “It’s a give and take,” said Skylar Olsen, senior economist from Zillow, a real estate website.

Standard deduction: What matters more is that both versions would roughly double the standard deduction — to $24,000 for married couples filing jointly and $12,000 for single filers.

Today, only about 30 percent of people who file tax returns itemize deductions (in California, about 33 percent do). Under the House version of the bill, only 10 percent would itemize, according to an estimate by the Tax Foundation.

That means fewer homeowners would get any benefit from a mortgage interest or property tax deduction. However, for most people who would switch from itemizing to not itemizing, the value of those deductions probably was not large enough to sway their decision to buy or not buy a home. In most markets, “the value of the mortgage interest deduction is negligible, because the value of the home, the debt you have on that home, the interest that you can deduct does not get you above and beyond the standard deduction, even currently,” Olsen said.

Capital gains: Today, you can exclude up to $250,000 in capital gains ($500,000 if married) when you sell your house, as long as you have owned and used it as your primary residence for at least two of the past five years. Both versions would change this to five of the past eight years. The House (but not the Senate) bill limits this tax break for households with adjusted gross income higher than $500,000 (married) or $250,000 (single).

As a whole, these changes could have a “modest impact on the priciest homes,” but not on the vast majority, said Jared Walczak, a senior policy analyst with the Tax Foundation. “The reasons people buy a home, or make a decision not to, have a lot to do with aspirations and financial resources and very little to do with whether the government has created this express nudge,” he said.

Based on its home-value estimates, Zillow calculates that 100 percent of people who bought a home today in San Francisco, where the median home value is $1.24 million, would take the mortgage interest and property tax deductions in the first year of ownership. Under the House bill, 96 percent would and under the Senate bill, 93 percent would.

In Alameda County, where the median home value is about $783,800, about 99 percent of people who bought today would take the deductions. However, that drops to 78 percent under the House bill and 55 percent under the Senate’s.

Although most people in the Bay Area would still benefit from the deductions, limiting them “might impact your decision to buy a more expensive or less expensive home. The size of the mortgage interest deduction can be significant for a lot of households,” Olsen said. If you limit the deduction “your willingness to outbid at the high end drops.”

That could put downward pressure on high-end home prices. But “it would not take away one of the major drivers” of Bay Area real estate, “which is is constrained inventory in the face of incredibly strong demand,” Olsen added.

Bose George, an analyst with Keefe, Bruyette Woods who follows the real estate industry, said, “We don’t think any of these changes would permanently impact the market,” although they could slow the rate of home-price appreciation in hot markets. “It obviously changes the equation (for) how much you can pay for a home. There could be a bit of a slowdown in markets that have been very strong for a while,” he said.

In the United Kingdom, Australia and Canada, homeowners can’t deduct mortgage interest, but those countries have homeownership rates similar to the United States.

Richard Green, a real estate professor at the University of Southern California, calculated that if Congress got rid of the mortgage interest deduction entirely, it might reduce the U.S. homeownership rate, currently around 64 percent, by about a half a percentage point, but prices could fall by 10 to 11 percent. “You have high-income people outbidding lower-income people for the same house because they get a bigger tax break,” he said. If you remove the deduction, they would still buy a home, but pay less for it. If you cut the maximum deduction in half, “you might knock (prices) down 5 percent. Given that they are rising 3 or 4 percent (a year) it wouldn’t be noticeable,” he said. It could even be good if it makes housing “a tad bit more affordable.”

The bills’ sponsors say that most Americans would receive a net tax cut under their proposals. If that’s true, it could be positive for real estate, because people would have more money to spend on a home, even if they lose some tax deductions.

While that may be the case in most states, it would not be in California, because many people here would pay more federal taxes after losing the state and local tax deduction, said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley.

“If either version passes, it’s quite negative for California and other states with high taxes,” he said. California has the highest maximum income tax rate, 13.3 percent. It is one of six states that together claim half the value of the state and local tax deduction.

“Too many blue-state Republicans cannot vote for this,” Rosen said. For that reason, he doesn’t think any bill that passes will eliminate the state and local tax deduction.

Article source: http://www.sfchronicle.com/business/networth/article/GOP-tax-bills-could-weigh-on-high-end-housing-in-12347728.php

The new CBS drama “Wisdom of the Crowd” follows Jeffrey Tanner, a Bay Area tech billionaire who has sunk everything he has into the creation of a cutting-edge crowdsourced app that helps to solve crimes.

In the pilot episode, Tanner (Jeremy Piven) invites police detective Tom Cavanaugh (Richard T. Jones) to check out the headquarters for his new endeavor. The cop is stunned to find himself in Oakland, of all places.

“Oakland?” he says, staring at Tanner. “I mean, that’s a little ghetto for you, isn’t it?”

That line of dialogue surely provoked winces from the city’s chamber of commerce members, but even they had to be somewhat surprised. TV viewers, after all, are accustomed to seeing major network series set in Los Angeles or New York. And the few shows that do find their way to the Bay Area almost always leave their hearts in San Francisco. (See: “Full House,” “Party of Five,” “Monk,” “Nash Bridges,” etc.).

But this season, two shows are set in the Bay Area and beyond the land of cable cars. In addition to “Wisdom of the Crowd,” there’s ABC’s “The Good Doctor,” a medical drama starring Freddie Highmore that calls San Jose home.

Highmore plays Shaun Murphy, a brilliant young surgeon with autism and savant syndrome. He has left behind a quiet country life to join St. Bonaventure Hospital in the Bay Area’s biggest city. (The hospital is fictional, of course.) There he uses his extraordinary medical gifts to save lives and challenge the by-the book notions of his colleagues.

“The Good Doctor” was created by David Shore, the same man who gave us “House.” When developing his latest show, he quickly came to believe that San Jose was the perfect locale for his leading man.

“Shaun is a character who asks fundamental questions about our behavior,” Shore says. “He’s curious about why we act the way we do. He’s not challenging, he’s curious — which, of course, has the effect of being challenging.

“San Jose is basically where the future is happening. It’s a place where technology seems to be well on its way to solving all our problems, and people sometimes seem to believe they have the world figured out. What better place to drop a character who asks the most fundamental questions about our nature and our humanity?”

As for “Wisdom of the Crowd,” executive producer Ted Humphrey tapped into both, his character’s mindset and a very real Bay Area real estate trend, to bring Tanner’s offices — known as The Hive — to Oakland.

“The decision to put The Hive in Oakland was about thinking as Jeffrey Tanner would think — reinventing himself and his company,” Humphrey says. “His old company, AllSourcer, is in Palo Alto in a traditional tech campus. He’s done that. But many startups are relocating to Oakland for cheaper real estate and a hip ‘Brooklyn-on-the-West-Coast’ vibe. And that’s what Tanner is doing too.”

OK, so there’s a there there. But does Oakland bring anything in particular to the story that another city might not?

“There’s a grittiness there that speaks, again, to the upstart nature of what Tanner is doing,” Humphrey says. “The Hive is located in an old canning plant, and the industrial nature of the location is a big part of our production design and the look and feel of our show.”

However, viewers should be aware that a bit of Hollywood make-believe is at play. While they’re set in the Bay Area, both “The Good Doctor” and “Wisdom of the Crowd” are not actually filmed here. The former is shot in Vancouver and the latter on the CBS lot in Studio City.

That’s the way it typically works. Aside from the rare exception, like, say, “Streets of San Francisco” or “Looking,” most Bay Area-set TV shows aren’t based here. They usually spend a few days filming a handful of exterior establishing shots and then flee to finish the bulk of the work elsewhere. “Parenthood,” for example, was set in Berkeley, but the show’s Braverman clan mainly hung out at Universal Studios. And those nerdy bros from “Silicon Valley”? The Sony lot in Culver City.

But why not just set up shop in the Bay Area? Because filming here is ultra expensive, and also often a hassle for production crews. “Parenthood” star Peter Krause once recalled that, while shooting the show’s pilot, Berkeley residents were “not very receptive to having film trucks on their streets.” And when “Trauma,” a short-lived NBC medical series, shut down a stretch of freeway in San Francisco to shoot a big tanker-trailer explosion, a producer talked of angry motorists giving him “the one-fingered salute and yelling, ‘Go back to Hollywood!’”

Interestingly enough, the Netflix drama “13 Reasons Why” actually does film on-location all over the Bay Area, and uses sound stages on Mare Island. But for purposes of the show, the Bay Area doesn’t play itself, instead standing in for the story’s small fictional town.

Both Shore and Humphrey say they hope to shoot occasional scenes in the Bay Area, schedules and budget permitting. Meanwhile, they try to blend some local flavor into their scripts when the stories call for it. For example, a recent episode of “The Good Doctor” had two frantic characters transporting a liver from San Francisco to San Jose and fretting over the traffic gridlock on I-280. (We can relate!) And “Wisdom of the Crowd” features a brainy computer whiz who did her grad work at Stanford. (Cal students undoubtedly will demand equal time.)

Some of that flavor might even include our local teams, as both producers claim to be fervent sports devotees. Shore says he “definitely needs” to drop a shout-out to the Sharks into his show. Humphrey pointed out that he already has a reference to the NBA champion Warriors in at least one episode — even though it hurt to do so.

“I was born and raised in Northeast Ohio,” he says, “and I’m a diehard Cleveland Cavaliers fan.”

‘The Good Doctor’

When: 10 p.m. Mondays

Where: ABC

‘Wisdom of the Crowd’

When: 8 p.m. Sundays

Where: CBS

Article source: http://www.mercurynews.com/2017/11/09/bay-area-cities-seize-the-spotlight-in-new-network-tv-dramas/

In what will seem like manna from heaven for Bay Area homebuyers, the Senate version of the Republicans’ high-stakes tax overhaul is set to be unveiled today with one bit of very good news: the chamber’s version reportedly keeps the mortgage interest deduction limit at $1 million, as compared with the House legislation released last week which placed a cap of $500,000 for new home sales.

Yet while that pain has apparently been averted for anyone wanting to buy a home in the ultra-pricey San Francisco Bay, another element of the Senate plan will put salt in the regions’ wounds.

Rather, make that SALT, for “state and local tax deductions,” a wonderful tax break for residents in this expensive corner of the country that now is going bye-bye if the Senate plan goes through. That could hit Bay Area residents in both bad and not-so-bad ways.

Here are some of the highlights of the bill about to come out of the Senate Finance Committee as its counterpart in the House — the Ways and Means Committee — wraps up work on its version by Friday, according to sources who spoke with the AP.

• The decision to not lower the cap on deductible mortgage interest might not thrill large swaths of the country, but in the Bay Area, where the median price of a new home now stands at $752,000, the move will be most welcome;
• Note that this change would only apply to new mortgages, so Bay Area residents who are already homeowners have nothing to worry about; under the House plan, though, house-seekers would pay more to the tax man for a half-million-plus loan. The real-estate lobby has been fighting hard to stop it from happening;
• On Thursday, the California Building Industry Association released a statement asking that the $1-million cap not be messed with, saying “in states such as California where the median price of a home is $533,000, it is essential for homeowners to be able to deduct the full amount of the mortgage interest deduction.  We are concerned that the limits to the deduction in the Act will create a depressive effect particularly in California which could lead to a nation-wide housing recession.”
• Again, keeping the limit in place is a big deal for Californians; the rest of the nation didn’t have as much to lose from a lowered cap since the median home price in the United States is about $200,000 and less than three percent of homeowners have more than $500,000 in debt, according to data from CoreLogic;
• As far as cutting SALT deductions, which are currently used by one in three Californians, the impact on Bay Area taxpayers is more nuanced:  it will hurt the region’s residents, but perhaps not as badly as it’ll hurt residents on the East Coast who pay higher property taxes. The House bill retains deductions for property taxes; the Senate bill reportedly would eliminate them. One estimate says that the one-third of Californians who use the SALT deduction receive an average $18,000 each in benefits;
• As the LA Times pointed out, California’s “endangered GOP lawmakers have been remarkably muted about the pending assault on their constituents” from the House bill; meanwhile, East Coast moderates are negotiating a compromise that would simultaneously help their states and make California the biggest loser.
• “Under the compromise,” says the report on the House bill, “Americans will be able to deduct property taxes of up to $10,000, but not income taxes. That’s rough if your state happens to have the nation’s highest income tax and one of the country’s lowest property tax rates. That is, if your state is California.”
• The Senate bill is likely to include measures to drop the corporate rate to 20 percent (although it reportedly delays that cut until 2019) and give relief to more pass-through businesses; it could also compress the personal income tax brackets from seven to four;
• Taken together, the two versions, however they end up, constitute the first major overhaul of the American tax code in three decades;
• On Thursday morning, CBS South Dakota Republican Sen. John Thune told “CBS This Morning” that portions of their bill will “largely follow the House’s action.”
• “The details are in some cases slightly different than what House did, we took a slightly different approach on some of the major issues but the contours of bill will largely follow the House’s action,” said Thune.
• Finally, the Senator defended the idea of doing away with deductions for state and local taxes, which would disproportionately impact residents of high-tax states like New York, New Jersey and California. “In terms of that deduction, it’s been around for a while but it also is one that we think subsidizes states that have higher taxes, and by eliminating that deduction it will force states to look at their budgets,” said Thune, adding that it’s a part of the tax code that “needs to go away.”

Here is a look at the potential impact of the House plan to cap the mortgage interest deduction. The Senate plan reportedly retains the tax break.

Article source: http://www.mercurynews.com/2017/11/09/what-the-senates-tax-bill-means-for-the-bay-area/