A few points about the GOP’s Tax Bill
Mortgage Interest Deduction: Current homeowners will be grandfathered in and still allowed to deduct interest against $1mm of mortgage debt. Starting in 2018, however, buyers will be limited to $750,000 in mortgage debt, and interest against home equity lines will not be tax deductible.
State and Local Tax Deduction: This will be capped at $10,000. This will be painful in California where state income taxes and local property taxes routinely exceed the limit.
Standard Deductions: Standard deductions are doubling to $12,000 for single filers and to $24,000 for married filers. This will make it unnecessary for many homeowners to deduct their interest and property taxes in any case. For example, a $500,000 mortgage at 4% incurs a $20,000 annual interest expense ($4,000 less than the standard deduction).
1. Real Estate Effect: The tax bill likely will adversely impact real estate to some extent in high end areas, but b/c the market is so hot and inventory is so low, it will probably not be noticed in the short run.
2. Stimulative Effect: The WSJ says the tax bill is one of the best things to ever happen to our economy. The New York Times says the tax bill is one of the worst things to ever happen to our economy. In other words… nobody knows.
A growing economy impacts real estate in a few ways: A. rates will likely rise faster and that could adversely impact real estate; and B. demand for real estate will likely increase, partially offsetting the impact of rising rates.
(1) See a CPA. We are not tax experts by any means.
(2) Prepaying Property Taxes. You might want to prepay your 2018 property taxes in 2017 to avoid the $10,000 cap in 2018. This could potentially save you thousands.
(3) Deferring Commissions. Depending how you receive your income now, you could potentially save significantly by deferring the receipt of your commission income until 2018 (in order to take advantage of the lower “pass through” rate). The lower pass through rate allows individuals to pay lower rates on “business income” (if they have a partnership or corporation) than they would on wages.
(4) Move to Texas. I say that somewhat facetiously, but we will likely see an increased exodus from high tax states to low tax states like Texas, Nevada and Florida.
(5) See a CPA for real advice. I am repeating this one for a little more “CYA” (did I mention that we are not tax experts?), but I do recommend talking to your CPA this year to see what you can do to save.
the third party was rejected.
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