The GOP's tax bill is set to disproportionately affect homeowners in affluent parts of the US.

Wealthier households are more likely to take advantage of key tax breaks that are set to be downsized, including the mortgage interest deduction and the state and local tax, or SALT, deduction.

Many states that would be most affected also happen to be blue states, including New York, California, Connecticut, and Hawaii.

The Tax Cuts and Jobs Act (TCJA) is set to become law, pending President Donald Trump's signature. The final bill was passed on Wednesday by the Senate and House, fulfilling one of Trump's major campaign promises.

It is likely to advantage wealthy Americans in numerous ways. But where housing is concerned, experts expect the new legislation to disproportionately hurt richer people.

Many of the states with the most expensive housing markets, including California, New York, and Hawaii, also lean Democratic. And while it might be a stretch to say the tax-code changes target blue states, they almost certainly would hurt these high-income urban centers more.

Three policy changes in the bill are worth noting for homeowners: the mortgage interest deduction cap will fall, the standard deduction will increase, and the state and local tax deduction has been restricted.

First is the mortgage interest deduction, which helps homeowners lower their taxable income.

The bill lowers the deduction cap to the first $750,000 of a loan. This was a compromise between the Senate's bill, which had left the threshold unchanged at $1 million, and the House version, which halved the cap to $500,000.

Also, the TCJA hikes the standard deduction for all taxpayers to $12,000 for single filers and $24,000 for joint filers. That means it may no longer be better for some households to itemize the mortgage interest deduction since it would be lower than their standard deduction.

Svenja Gudell, the chief economist at Zillow, estimated that about 44% of US homes are worth enough for it to make sense to itemize the mortgage interest deduction. That falls to 14.4% under the new bill, as reported.

Richer states lose more

Housing interest groups fear that scaling back tax incentives for homeownership would hurt home prices in the most expensive markets.

They forecast that it would discourage existing homeowners from moving, meaning they're not buying houses and also not supplying the market with new listings.

The exact impact on home prices is uncertain. At one extreme, the National Association of Homebuilders has warned about a housing recession.

But it may not be that bad. Just 9.4% of owner-occupied homes have a mortgage of more than $500,000, Credit Suisse analysts estimated. Additionally, the median price for a single-family home was $245,500 on a trailing 12-month basis through October.

Credit Suisse

This implies that most of today's homeowners don't qualify for this tax benefit.

What about home sales?

The argument for lower prices and sales is premised on the idea that tax benefits encourage homebuying. The mortgage interest deduction cap applies only to new purchases, so existing homeowners may become reluctant to move.

"While more disposable income for buyers is positive for housing, the loss of tax benefits for owners could lead to fewer sales and impact prices negatively over time with the largest impact on markets with higher prices and incomes," said Danielle Hale, the chief economist at Realtor.com.

But it's also worth considering why people buy homes.

"A very small fraction of the home buying public actually makes the purchase price decision based on their tax deduction," Tom Porcelli and Jacob Oubina, economists at RBC Capital Markets, said in a note.

Even in a perfect world in which buyers are rational, they added, the price changes would be within the boundaries of normal price negotiation that happens in any homebuying transaction. "Don't forget that parties in the transaction are already willing to concede about 5% to real estate brokers," they said.

Also, price drops at the highest end of the market would have a minimal macro effect because it's also the smallest end of the market by share.

Credit Suisse

The bottom line is that America's most expensive households will be the places to watch for how the GOP's tax plan affects the housing market.

SALT

The third change that could hit wealthier homeowners is the state and local tax deduction (or SALT), which allows Americans to lower the share of their taxable federal income. The bill caps SALT at $10,000 of property, individual income, and sales taxes.

Eleven House Republicans from California, New York, and New Jersey — all high-tax states — voted against the bill because some of their constituents may be paying more in taxes .

High-income households are more likely than other income groups to benefit from SALT and claim the deduction, the Tax Policy Center research found. Among households earning $200,000 to $300,000 a year, 93% claimed the SALT deduction, compared with 39% of households earning $50,000 to $75,000.

And so instead of the promised tax cuts, some rich people in blue states could be paying more to the federal government.