We continue to look ahead into the new year with the series “What’s the outlook for real estate in 2018?”
NEW TAX LEGISLATION WILL IMPACT HOMEOWNER DEDUCTIONS
The “Tax Cuts and Jobs Act” passed at the end of 2017 nearly doubles the standard deduction, so far fewer Americans are expected to itemize this year. For those who do, however, it could mean less homeowner deductions are available than in the past.
Previously, homeowners could deduct interest paid on the first $1 million of mortgage debt, but that threshold has been lowered to $750,000 for new mortgages. (Existing mortgages will not be impacted.)
Additionally, taxpayers will no longer be able to fully deduct state and local property taxes plus income or sales taxes. The new legislation restricts this deduction to $10,000. It also eliminates the deduction for moving expenses (except for members of the Armed Forces) and interest on home equity loans unless the proceeds are used to substantially improve the residence.10
It’s yet to be seen how the tax bill will impact the real estate market overall. While some economists predict a price reduction in certain markets, Republican lawmakers project the bill will increase take-home pay and stimulate the economy overall. According to Realtor.com Senior Economist Joseph Kirchner, “Some house hunters—particularly wealthy buyers—will see an increase in after-tax income, making an already tough housing market even more competitive. This increased demand could drive prices up even higher than they are already.”11
What does it mean for you? If you’re an existing homeowner, be sure to consult a tax professional if you’re concerned about the impact the new tax bill could have on you.
And if you’re planning to buy or sell this year, we can help you determine how the tax bill could affect demand in your current or target neighborhood and price range.
I’M HERE TO HELP
While national real estate numbers and predictions can provide a “big-picture” outlook for the year, real estate is local. And as local market experts, I can guide you through the ins and outs of our market, and the local issues that are likely to drive home values in your particular neighborhood. If you have specific questions, or would like more information about where I see real estate headed in our area, please give me a call! I’d love to discuss how issues here at home are likely to impact your desire to buy or a sell a home this year.