In addition to home shoppers, other people who would see their itemized tax benefits saved from the chopping block under the revised plan include graduate students and those who take the sales-tax deduction.
The tax deal Republicans in Congress reached this week would limit the mortgage-interest deduction for buyers of pricey homes in Seattle and the Eastside, but will do far less to affect the local housing market than an earlier proposal.
The agreement also restores, with limits, the sales-tax deduction that is heavily used in Washington state but had been on the chopping block.
The original tax plan, released by Republicans last month, limited mortgage-interest deductions to just the first $500,000 of a home loan for future purchases. The deduction is used by taxpayers who itemize, as homeowners with mortgages typically do.
Lots of local buyers would have been hit with a higher tax bill under the change, as more than a third of Seattle-area home loans exceed half a million dollars.
Now, under a tax-plan agreement reached Wednesday by leaders in the Senate and House, that mortgage-interest cap is raised to a loan amount of $750,000. That’s halfway between the $500,000 proposal in the House and the current limit of $1 million (which had been maintained in a Senate version of the bill).
Both houses of Congress could begin voting on the tax-reform deal as soon as next week.
The change means about two-thirds of the home shoppers who would have faced a higher tax bill under the original proposal are no longer affected. But people looking to buy in some pricey Seattle and Eastside markets would still see higher tax bills.
Existing homeowners won’t be affected by the tax change, and people who don’t itemize would get a standard deduction that nearly doubles under the plan.
Most Read Business Stories
- Oil industry is booming, but nervous
- Slowing real estate might let us catch our breath — or knock the wind out of us | Jon Talton
- Home-security startup Ring is now in Amazon's constellation, but moving in its own orbit
- Hurricane damaged Seattle company's Alaska-bound factory trawler in Florida shipyard
- Management shake-up at Alaska Air will bring layoffs
The new mortgage-interest limit is close to the median price of a house in Seattle, but down payments shrink the size of a mortgage. Most of the people hit by the tax plan would be buyers of million-dollar homes.
About 3,700 homes, or 12.8 percent of all homes bought this year in King County, had mortgages that exceeded $750,000, according to Attom Data Solutions, which tracks mortgages nationwide. About 1,440 were in Seattle, 550 in Bellevue and 300 in Kirkland.
Nearly all home sales in Medina and Yarrow Point were above the $750,000 mortgage threshold, while two-thirds of Mercer Island sales were and one-third in Bellevue and Sammamish.
Elsewhere, the impact would be small.
Just 220 homes sold in Snohomish County this year had mortgages topping $750,000. There were 140 in Pierce County and 70 in Kitsap County.
Several Washington counties, among them Franklin and Lewis, haven’t had a single home sale that pricey this year.
Since the tax proposals were first unveiled last month, special-interest groups like real-estate firms and homebuilders had lobbied against the bill. Local companies have taken an especially high interest in the negotiations because homes here are so pricey.
The typical Seattle-area homeowner who used the mortgage-interest deduction claimed $11,540 last year, the 16th-most of any region in the country, according to LendingTree. About 29 percent of all filers here claim the deduction, also among the highest in the nation.
Other effects locally
Among the other changes in the latest tax plan that had been closely watched locally:
There’s a new $10,000 cap on combined property and sales-tax deductions, according to early reports.
Most people here won’t reach that cap, however: The average federal deduction for all state and local taxes, including property and sales taxes, is $7,400 across Washington, although it exceeds $8,000 in King County.
Initially, the sales-tax deduction was axed entirely, while the property-tax deduction was capped at $10,000.
The average homeowner in King County pays $5,600 a year in property taxes, but it’s common for tax bills to soar far higher in super-pricey places like Medina and Mercer Island.
Across the Seattle metro area, 4 percent of property owners pay more than $10,000 in property taxes, according to Trulia.
As for sales taxes, about 24 percent of Washington filers claim the deduction, with an average claim of $2,650.
For students, Republicans have dropped their previous plan to tax tuition waivers for campus employees like graduate students.
The University of Washington had said about 7,000 grad students could see their federal income taxes double under the proposal, while an additional 1,900 grad students would be hit at Washington State University.
Also removed from a previous version of the bill: plans to tax interest on student loans and certain medical expenses.