Real Estate + New Tax Code Legislation : An Overview
Cameron Lewis, Branch Manager for Acopia Home Loans in Asheville NC. NMLS 112509
Collin O’Berry, Managing Broker of the Altamont Property Group with Keller Williams Realty in Asheville NC
Tax code reform has been a hot topic in the news lately! There was a lot of buildup over the new tax legislation and while there are some significant changes, the direct impact on the housing market is much less than expected.
NOT GOOD FOR HOUSING
Standard Deduction: Basically doubles in 2018: single filers $6,350 (2017) to $12,000 (2018) and joint returns: $12,700 (2017) and $24,000. This will reduce the value of mortgage interest and property tax deductions as tax incentives for homeownership. It is estimated that roughly 22% took advantage of these deductions in recent years and that could be cut in half or more.
Home Equity Deduction: This was eliminated (previously up to $100,000). Those with 2nd mortgages/equity lines may benefit from refinancing to a larger 1st mortgage.
*Having a financial/mortgage plan in place may be more important than in the past to help qualifying families take advantage of tax deduction strategies
NEUTRAL FOR HOUSING
State and Local Tax Deduction: Itemized deductions up to $10,000 for the total of state/local property taxes and income or sales tax. We don’t believe there was a limit previously. This may not impact our market as it would in states where local property taxes are higher.
Moving Expenses: Active duty members of the armed forces may deduct moving expenses whereas previously it was available to a broader range of people if they met certain distance and time requirements. Although we’re unsure on specific details, it’s unlikely that the deductibility of moving expenses was ever an incentive to purchase or own real estate.
GOOD FOR HOUSING
Mortgage Interest Deduction: The primary/second home interest reduction for new loans closing post 12/14/17 was reduced from $1.1 million (including $100,000 of home equity debt) to $750,000. We chalk this up as a positive since there were rumors this could be removed completely.
Capital Gain Exclusion: No change to excluding paying capital gains tax on the gain of the sale of one’s primary residence up to $250,000 single/$500,000 joint when the property was occupied as one’s primary residence in at least 2 of the last 5 years. There was concern that this could be eliminated so this is a BIG bonus that it remained as part of the tax law!
Capital Gains Tax Rate: No noted changes.
1031 Exchange for Real Property: No noted changes. We are especially pleased to see no changes here.
While some impacts of the new tax legislation will be felt, all in all it could have been much worse from a real estate, home ownership, and investment property tax perspective. Also please note we are not certified accountants, rather these are our assessments regarding parts of the law that do affect housing in our market. It’s always advisable to connect with your CPA for more information.
Your questions, comments, and feedback are most welcome! Cameron Lewis can be reached at email@example.com, 828-231-4909, or at http://www.acopiahomeloans.com/cameron-lewis.
Collin O’Berry can be reached at firstname.lastname@example.org, 828-772-1667, or www.altamontpropertygroup.com.