AB 1932: Personal income tax: mortgage interest deduction.

The Personal Income Tax Law allows various deductions in computing the income that is subject to the taxes imposed by that law, including, in modified conformity with federal income tax laws, a deduction for a limited amount of interest paid on acquisition indebtedness, as defined, with respect to a qualified residence of the taxpayer. Existing law limits the aggregate amount treated as acquisition indebtedness for these purposes to $1,000,000, or $500,000 in the case of a married individual filing a separate return. Existing law specifies for these purposes that a qualified residence includes the taxpayers principal residence and one other residence selected by the taxpayer, as provided.

This bill, for taxable years beginning on or after January 1, 2025, would disallow the deduction of acquisition indebtedness with respect to a qualified residence of a taxpayer other than the principal residence.

This bill would require the Franchise Tax Board, in consultation with the Department of Finance, to estimate the amount of additional revenue resulting from the above-described modifications made with respect to the calculation of taxable income under the Personal Income Tax Law by this bill and to notify the Controller of that amount, as provided.

The bill would establish the continuously appropriated Housing, Homeownership, and Homelessness Prevention Response Fund in the State Treasury, and would direct the Controller to transfer an amount from the General Fund to that fund equal to the above-described estimates. The bill would require the moneys be used for housing purposes, as specified. By establishing a continuously appropriated fund, this bill would make an appropriation.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of ²/₃ of the membership of each house of the Legislature.