East Bay Market Update - November 2024

Thinking of buying or selling a home in Berkeley?

At Calia Homes, we specialize in helping East Bay clients navigate the Berkeley real estate market with confidence. Whether you're a first-time buyer searching for the perfect home near the Gourmet Ghetto or a longtime homeowner preparing to sell in the Elmwood or Northbrae neighborhoods, our experienced Berkeley Realtors offer trusted guidance, local expertise, and a people-first approach. With decades of experience and a reputation built on referrals, we’re here to help you make smart, successful real estate decisions in Piedmont and the surrounding East Bay communities.

The Mortgage Interest Deduction: A Century-Old Tax Break Under New Scrutiny

The mortgage interest deduction (MID) has been a cornerstone of American homeownership for over 100 years, reducing tax burdens on mortgage interest and making buying property more affordable. As the

political landscape shifts, this historic tax policy faces renewed scrutiny.

Recent Changes

The 2017 tax reform capped the interest deduction for new loans for married couples at a loan amount of $750,000. From 1986 to 2017, the loan amount was $1 million. While this change impacted new homeowners, it didn’t have a noticeable impact on housing demand. If this tax exclusion was increased it would undoubtedly have a positive impact on inventory availability in Piedmont and the greater Bay Area.

What’s Next for the MID?

Many of the 2017 Tax Cuts and Jobs Act provisions are scheduled to sunset on Dec. 31, 2025. And, in a higher interest rate environment, the mortgage interest deduction is even more relevant to homeowners. Per the Journal of Accountancy, the $1 million limitation introduced in 1986 would amount to nearly $3 million in today’s dollars. Given the Bay Area’s high mortgage amounts and property taxes, we encourage our readers to stay up to date regarding Washington’s plan for this homeowner tax benefit that affects our homebuying friends and neighbors.

Capital Gains Tax Note

Currently, there is a capital gains tax exclusion that enables homeowners who meet specific requirements to exclude up to $250,000 (or up to $500,000 for married couples filing jointly) of capital gains for their primary residence. This means that if you sell your home for a gain of less than $250,000 (or $500,000), you will not be Established in 1913, the MID initially allowed deductions required to pay capital gains tax on that amount. on all interest payments, including personal loans, and indirectly supported homeownership. After WWII, it became central to U.S. housing policy, helping millions buy homes and stabilizing real estate markets. Did you know that this capital gains tax exclusion was created in 1997 and that the amounts have not been adjusted since? Adjusted for inflation, $500,000 in 1997 would now be worth $967,043. (Corelogic & Savings.org)