Brokers Expect Tax Reform to Hurt High-Cost Markets, Benefit Other Regions
The mortgage interest deduction, a sacrosanct tax break for decades, no longer is so generous. And the federal tax offset for state and local taxes, another nigh-untouchable piece of the tax code, has been pared back.
(Mountain Lakes, NJ, February 15, 2018) — Over the objections of the National Association of Realtors, Congress in late 2017 passed a tax reform package championed by President Donald Trump. Realtors in high-cost, high-tax areas such as New York, California, Maryland, and Massachusetts say they expect less demand and falling prices as a result.
However, many brokers in Florida and other relatively affordable, low-tax states welcomed the news.
The plan nearly doubles the standard deduction starting in 2018, a change that means even fewer taxpayers will gain a benefit from the mortgage interest deduction.
A second effect comes in the form of a less generous offset for state and local taxes, or SALT. In states with steep property taxes and high income taxes, homeowners could deduct their local tax payments from their federal tax bills. The new tax plan limits that amount to $10,000.
The housing industry dodged a bullet on a third tax break. The tax plan originally included a provision to lengthen the period of ownership required to qualify for an exemption from the capital gains tax. The minimum holding time of two years would have been extended to five years.
Analysis and commentary from broker/owners across the United States appears in the February issue of Real Estate Broker’s Insider newsletter.
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