California AB 71 would eliminate tax deductions for second homes



State legislators are looking for funding sources to help pay for affordable housing and help alleviate California’s housing crisis. A proposed bill, AB 71, would eliminate the deductions. The law would apply only to Californians who spend a significant amount of time in their second homes (not rentals, defined by the IRS as properties where owners spend “less than 10% of their time”). In other words, AB 71 targets those wealthy enough to afford a second house and not use it primarily for rental income. 

The Franchise Tax Board estimates 195,000 homeowners would be affected by AB 71. The change would cost these second homeowners, on average, about $1,140 annually, in additional to the sizable tax breaks they receive at the federal level on both their properties.

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