Home Purchase Assistance Fund: personal income taxation: mortgage interest deduction.
Impact
By implementing these modifications, AB 946 is designed to increase contributions to the Home Purchase Assistance Fund, which is continuously appropriated for expenditure, thereby enhancing the state's ability to support home purchase assistance initiatives. This could lead to an increase in available resources for programs aimed at facilitating home ownership among low-income individuals and families. The measure also requires the Franchise Tax Board to estimate the revenue impact and ensure that any additional funds are transferred appropriately to the assistance fund.
Summary
Assembly Bill 946, introduced by Assembly Member Lee, proposes modifications to the existing Home Purchase Assistance Fund and the rules governing personal income taxation related to mortgage interest deductions. Specifically, the bill aims to assist low- and moderate-income homebuyers, particularly first-time buyers, by modifying the way taxable income is calculated with respect to acquisition indebtedness. The bill disallows the deduction for acquisition indebtedness related to a second residence, restricting this benefit solely to primary residences starting in the taxable year 2022. This change is intended to bolster the Home Purchase Assistance Fund by redirecting additional revenue generated from the disallowed deductions.
Contention
The bill's restriction on mortgage interest deductions for non-primary residences has sparked debate among various stakeholders. Proponents argue that the legislation focuses resources on primary housing needs, thereby supporting housing stability for families. Critics, however, may view the restriction as a limitation on individual financial freedoms and an imposition that could disincentivize property investment. Additionally, the transition to new tax rules may complicate tax preparation for some taxpayers, leading to concerns over the administrative burden placed on individuals and tax professionals alike.