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AB-946 (Lee) Mortgage Interest Deduction on Second Homes


April 2021

AB 946 would limit the mortgage interest deduction on homes other than primary residences in order to increase the number of down payment assistance loans available. C.A.R. opposes this legislation. C.A.R. supports down payment assistance programs, but does not feel this is the way to do it.

Currently, California allows deductions for home mortgage interest on home mortgages up to $1 million. This is the maximum amount allowed, whether it is one or two homes. There is no additional benefit for the second homeowners. For example, a worker may choose to keep a small condominium near their work in a high price area but, due to remote work, also buys a larger home in a more affordable area better suited for the worker’s family.  It makes no sense to penalize them for that.

This legislation would be at the expense of those who have made significant financial decisions, relying on this tax law. Limiting the mortgage interest deduction will result in higher costs for families and comes at a time of great uncertainty to families across the state who are currently grappling with the economic uncertainty created by COVID-19. Furthermore, a secondary residence for many is used by relatives, even more so in the COVID-19 pandemic where second homes have provided families with a place for displaced or economically struggling relatives to live and to care for loved ones, especially when quarantines have been necessary. This bill is pending a hearing in the Assembly Revenue and Taxation Committee. C.A.R. is in opposition to AB 946.

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