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If nothing in life is certain except death and taxes, then it’s equally true that many of us would rather think about death than ponder the tax code.

But with a significant tax policy reform bill floating between the House and the Senate in Washington, D.C., it’s time to start thinking about taxes — especially if you’re a homeowner in the East Bay area. If Congress passes the bill in its current form, then East Bay homeowners will almost certainly feel its impact, according to experts.

“We really don’t know what the final format will be,” cautions Laurie Capitelli, a former member of the Berkeley City Council. But as it’s currently written, the two states that stand to see the biggest impact from the bill are California and New York, in part because of the median home prices in those states, so it’s wise to get a handle on the potential ripple effects right now.

Here’s what to expect if the bill passes — both positive and negative consequences.

What’s in the bill?

There are a few significant components of this tax bill that homeowners everywhere (and especially in the East Bay) should note.

  • The bill would reduce the corporate tax rate — the tax rate that businesses pay — from 35 percent to 20 percent starting in 2019, and some small business income could even be taxed as low as 9 percent, depending on the business. Individual tax brackets and rates would also change.
  • Individuals would no longer be able to deduct state and local taxes (SALT).
  • The individual standard deduction rate would increase to $12,000 from individuals (it’s currently $6,350) and to $24,000 for married couples (currently $12,700). Child tax credits would increase to $1,600 from $1,000.
  • Mortgage interest deduction (MID) caps would move from $1 million to $500,000.
  • Most personal itemized deductions and credits would disappear, including student loan deductions, alimony deductions, and medical-expense deductions.

Many of these changes will have a disproportionate impact on homeowners or potential buyers in areas with high median home prices and significant state and local tax burdens. (That means you, East Bay Area!)

The good

Fair warning: Experts across the board don’t foresee East Bay Area homeowners making out like bandits under the new tax code. In fact, it’s almost certain to be exactly the opposite — but there might be some silver linings.

“The silver linings feel a little bit more like bank shots,” notes Steven Bliss, director of strategic communications at the California Budget & Policy Center. In other words, there are a few potential ripple effects that could create some benefits for homeowners (or potential buyers) in the East Bay Area, but they’re very much “if/then” scenarios that are not guaranteed to play out.

The biggest potential positive short-term repercussion of the tax bill assumes that a good portion of the local economy will receive a tax break of some sort. The cut to corporate taxes means that businesses can keep quite a bit more of their profits, which could lead to salary increases or additional investment in company growth, depending on how the business intends to use that “extra” cash.

And homeowners on the wealthier side of the spectrum could see a tax break. The highest individual tax brackets would still pay a tax rate of 39.6 percent, but only individuals making more than $500,001 or couples making more than $1 million would have to pay that rate. Currently, single filers who make at least $418,401 and couples who make at least $470,701 pay the 39.6-percent rate. So any East Bay Area single taxpayers who make more than $418,401 but less than $500,001, and any couples who make more than $470,701 but less than $1 million, would be looking at a tax break — they’ll get bumped down to the 35-percent tax bracket. Depending on where your household is in that spread, you could end up with some extra money to invest (maybe in real estate!).

If those wealthier individuals and the companies paying corporate taxes are willing to reinvest some of their newfound savings into the community, there could be some benefits to the tax plan.

The bad and ugly

One of the biggest repercussions for homeowners in the East Bay Area is bound to be the new MID rules. In most areas, reducing the MID from $1 million to $500,000 would only affect people who own luxury homes and mansions — but median home prices exceed $1 million in a dozen cities in the East Bay Area.

If the MID is cut in half, it means new homeowners who buy their homes for between $500,001 and $1 million will be able to deduct significantly less of their mortgage interest. And because the “grandfather” deadline for home purchases was November 2, if this bill does pass in its current form, you shouldn’t expect a ton of housing inventory to suddenly manifest as homeowners decide to cash out and retire before the laws change. (As far as the IRS is concerned: If this bill passes, the laws around MID already did change more than a week ago.)

“The definition of middle-class in the Bay Area is a whole lot different than the definition of middle-class in Mobile, Alabama,” notes Capitelli. In a higher-income area (like ours), changing up property tax deductions, lowering MID amounts from $1 million to $500,000 and eliminating deductibility of second homes will affect many more people, he said.

In fact, the MID situation would join Proposition 13 as a strong reason for homeowners not to sell, and therefore it could make East Bay housing inventory shortages even worse.

The MID does need to be reformed, says Bliss, but he believes this approach won’t be good for California — either for homeowners or for potential buyers.

“If you live in a state with an income tax at all and you live in a state with a progressive income tax structure, like California, and on top of that you live in a part of that state with high housing costs, you’re going to be particularly slammed by this current proposal,” he explains. “It’s getting you more on the property tax side — it’s going to cap what you can claim — but also on the scrimping and saving to afford a house. Now the math is going to be stacked even further against you.”

So if fewer people are able to afford a home and sellers will take a financial hit if they sell, what will that mean for rental housing? Probably nothing good.

“We just suffered a major housing loss in Sonoma and Napa Counties,” notes Capitelli, so both purchase and rental stock in the entire San Francisco Bay area are already tight. He says there could be an increase in demand for rental units to some degree — and depending on what rental availability and rent control is already like in your neck of the woods, that might mean increases or fewer options when the time comes to move.

We may also see inflationary pressure on prices increase if the Federal Reserve continues to push up interest rates. “We’ve already got crazy inflationary pressure in the Bay Area in terms of housing,” Capitelli explains. “I think a ratcheting up of interest rates will be a depressant on the market.”

Bliss also explains that if homeowners are less willing to sell their homes and move (because of the potential financial penalties or because they will lose their current tax perks), it will hamper their ability to move for job opportunities and could cause decreases in labor market mobility — not a good outcome for an economy as big as California’s.

“If it puts a damper on the California economy — everybody gets hurt by that,” he says.