If you’re planning to buy a home in parts of the country where real estate is pricey and taxes are high, you could soon snag some bargains thanks to the Republican tax-cut proposals. If you’re planning to sell, you could face some pain. 

And in other parts of the country, the tax changes could make moving more costly, prevent you from borrowing against your home for certain expenses, and make it harder for you to recoup your losses after a major home catastrophe.

Although the final tax bill is still to be worked out, the proposals the House and Senate have already voted on could create a whole new ballgame for homeowners. Here’s why:

Your Tax Bill Could Rise in Some Regions

If you’re living in a high-tax area, the Senate and House bills hit you in several ways. Both limit the deduction of state and local taxes to $10,000 in property taxes. (There’s talk of letting taxpayers have the choice of applying that $10,000 exclusion to either income or property taxes.) If you itemize, as 30 percent of Americans do, you could lose a significant portion of your deductions. 

“If you live in the northeast or in California, your property taxes are going to add up to more than the $10,000 deduction and you’ll end up paying more,” says Darren Zagarola, a certified public accountant and certified financial planner based in Princeton, N.J. “In other places it’s not going to hurt anybody.” 

In the aggregate, residents of six states—California, Florida, Illinois, New Jersey, New York, and Texas—account for half of the deductions taken for property and income taxes, says the Tax Foundation, a think tank based in Washington, D.C.  But the percentage of individual residents who take the write-offs is greatest in blue states such as California, New Jersey, and New York.  

How much you could be affected, though, depends on your individual circumstances.

When we evaluated how a couple making $220,000 in suburban Westchester County, N.Y.—and paying $22,000 in property taxes and $9,727 in state income taxes—would fare under both plans, we found that the House plan would cost them an additional $1,568 and the Senate bill would leave them essentially even. The disparity was due to a number of factors, such as more favorable overall tax brackets and rates in the Senate plan. 

Home Markets Could Slow in Some Areas

In the most affected areas, the higher taxes could make real estate less desirable and force prices to drop, some observers say. The National Association of Realtors, which has outlined the tax bills’ impact on every state and the District of Columbia, has estimated, for instance, that as a result of federal tax reform, home prices in California could drop, on average, from 8 to 12 percent. The decline would mean a loss in home value of $37,710 to $56,550 for the typical homeowner, the association concludes.

“In these areas you’ll begin to see homebuyers hesitate or scale down which properties they purchase,” says Lawrence Yun, the association’s chief economist.

The House bill further complicates matters by limiting the deduction of interest on new mortgages to loans of $500,000 or less. Buyers of higher-priced homes may balk at taking on mortgages beyond that limit because they will no longer get the tax break. (The Senate keeps mortgage interest deductibility for loans of up to $1 million, the current limit.)

“The upper end of the market may completely stall,” Yun says.

Home Buyers May Benefit But Should Be Cautious

Other observers don’t see as great an impact on home prices. Nicole Keading, an economist  at the Tax Foundation, estimates that home values in high-tax areas could drop by 2 to 3 percent in the short term. Nevertheless, she sees a silver lining in that price drop.

“Any decrease in home values means it’s now cheaper for first-timers to buy a home,” she says. “We can’t just look at the impact on those owning the homes.”

More on Tax Reform From Consumer Reports

Over the long term, says Aaron Terrazas, senior economist at real estate website Zillow, state and local policymakers in high-tax states will respond by lowering taxes or slowing the growth of local taxes to continue attracting employers and workers. But he isn’t convinced that the price drops in the short term, which he estimates to be 10 percent overall, will be sufficient to attract buyers.

“We won’t know all the consequences until a year or two after the bill goes into effect,” he says. “There is so much up in the air right now, it’s a time when it’s important to be careful. This should give buyers pause.” 

Interest rates are also rising, which increases the cost of a mortgage.

“The worst-case scenario is that tax changes reduce the incentive to own,” says Nela Richardson, chief economist at Redfin, the real estate website. “Prices are high, mortgage rates are set to increase, and tax changes may make owning a home a more expensive in some markets. This could change the rent-own equation for first-time buyers.”

Moving Often Could Cost You More

Other proposed measures affect homeowners everywhere in the U.S. One proposal, present in both bills, could limit how often homeowners move. It increases the period in which homeowners have to stay in their primary residence in order to avoid significant capital-gains taxes from a home sale.

In other words, if you want to use all your profit toward buying another home, you’ll have to stay put longer.

Currently, you have to live in your primary residence for at least two of the last five years to exclude a significant portion of your capital gain—roughly, your profit—from federal tax. For singles, the exclusion is $250,000; for couples, it’s $500,000.

Both bills say you would have to live your home for at least five out of the past eight years to get that tax break. 

“It's a disincentive to move,” says Alex Casey, a policy adviser at Zillow.

The change won’t affect the average American, who typically stays put for seven years before moving. But for people who divorce, need to move for a new job, or downsize prematurely because of financial difficulties, this change could pose problems. 

“Getting the timing right is more complicated now,” Terrazas says.

Other Changes Could Affect All Homeowners

Among the changes that could affect everyone:

• The Senate bill limits homeowners’ ability to deduct interest on up to $100,000 of home equity loans and lines of credit. The bill still allows homeowners to deduct interest on loans used to buy, build, or improve a primary residence. But if you used a home-equity line of credit or loan toward education expenses or unreimbursed healthcare costs, you’d get no tax benefit from doing so. 

• The House bill disallows deduction of interest from a second home. Richardson projects that the change could negatively affect markets in Southern Florida, California, and along the East Coast of the U.S. “Those markets are vulnerable already,” she notes. 

• Homeowners could no longer deduct unreimbursed losses from a fire, a flood, or another financial catastrophe. Both bills eliminate that longstanding tax break. 

All these changes don’t change the overall attractiveness of owning a home, Richardson maintains. They just make the decisions around buying, selling, and staying put more complex.

“Tax reform has introduced some new questions for buyers and sellers, but fundamentally, real estate continues to be a solid long-term investment,” she says. “Because everyone’s personal financial situation is different, consulting a tax professional is the best way to get definitive advice about your specific situation. And don’t panic.”