Does the new Tax plan make Illinois less attractive? (Chicago: homes, buying)

[wjj]

Originally Posted by RJA29

Are refinances also no longer eligible (in current wording, which will not pass as is, if at all) for the deduction? Just purchases?

It looks like refinances generally qualify to the extent they do not exceed the current principal amount of the existing loan.

Everyone is talking about the 500K threshold, but for single taxpayers, the limit is only 250K. That is going to screw a lot of people, including those who were married but become single due to divorce or death of a spouse.

[wjj]

Originally Posted by wjj

Everyone is talking about the 500K threshold, but for single taxpayers, the limit is only 250K. That is going to screw a lot of people, including those who were married but become single due to divorce or death of a spouse.

Sorry, this is wrong. The threshold is reduced to 250K for married filing separate filing status not single. Too late to edit. Apologies.

[RJA29]

Originally Posted by wjj

Sorry, this is wrong. The threshold is reduced to 250K for married filing separate filing status not single. Too late to edit. Apologies.

It really looks like the biggest hit might be the capital gains on sales. Any updates on this? 5 years instead of 2 is big difference.

[wjj]

Originally Posted by RJA29

It really looks like the biggest hit might be the capital gains on sales. Any updates on this? 5 years instead of 2 is big difference.

This is a killer too. Current law is that married filing joint taxpayers can exclude up to $500K of the gain related to the sale of their principal residence. The exclusion is only $250K for all other taxpayers. To qualify, the home must be used as the taxpayer's principal residence for 2 of the previous 5 years. The exclusion can be used once every two years.

This proposed legislation would require that the home be used as a principal residence for 5 out of the previous 8 years and the exclusion can only be used once every 5 years. Further, the exclusion will now be phased out if the taxpayer's three year (current year plus two immediately prior tax years) average modified adjusted gross income exceeds $500K for married filing joint taxpayers and only $250K for all other taxpayers. Not a very housing friendly provision. And this is simplification?

Effective for sales after 12/31/2017. I did not see any binding contract exception, but you would think there would be one. So someone who has owned their house for 3 years and planned on selling next year and excluding the gain looks to be out of luck. For two more years. The Ways and Means staff commentary is comical. They justify this change as a way to attack certain flippers! Talk about shooting a mosquito with a howitzer.

[nikitakolata]

Well I for one hope this doesn't pass. Our property taxes (on our less than $1 million home) are $18,000. Capping it at $10k for all deductions will really hurt. I tried those two tax calculators and our taxes are nearly doubled under the Trump plan. So, no thanks!

My parents had a house in St. Charles that they sold for $650,000. Their property taxes were over $21,000 on that house. My parents did well for themselves, but they're hardly rolling in money. That house became valuable due to all the sweat equity they put into it. Property taxes in this state are insane, IMO. I'm only willing to pay them now because I have a child that will go to public school and we have to be near Chicago for our jobs/business. Once she's out of school we'll move to a town with lower taxes, if possible. Maybe we'll move to Wisconsin or Indiana.

[flamadiddle]

nikitakolata, sadly Wisconsin is not much better! We looked! And Indiana although much better on taxes is a bit sketchy in most areas...

[ToriaT]

You know the Trump plan will screw us. Lets hope it does not pass.

[nikitakolata]

Originally Posted by flamadiddle

nikitakolata, sadly Wisconsin is not much better! We looked! And Indiana although much better on taxes is a bit sketchy in most areas...

Yeah, I have actually looked too and I know you're right. What *might* work would be if my husband retires from his job or gets a job that allows him to work remotely. Then I just need to hire someone to handle a lot of my business. In that scenario, we could live in a decent part of Indiana and I would just only come here as needed (so, once or twice a week, at off times to avoid traffic). Then, maybe, Indiana would work. In reality though, we're probably stuck here until we retire and then, if we can go anywhere, there's no reason to choose Wisconsin or Indiana.

[RJA29]

Originally Posted by wjj

This is a killer too. Current law is that married filing joint taxpayers can exclude up to $500K of the gain related to the sale of their principal residence. The exclusion is only $250K for all other taxpayers. To qualify, the home must be used as the taxpayer's principal residence for 2 of the previous 5 years. The exclusion can be used once every two years.

This proposed legislation would require that the home be used as a principal residence for 5 out of the previous 8 years and the exclusion can only be used once every 5 years. Further, the exclusion will now be phased out if the taxpayer's three year (current year plus two immediately prior tax years) average modified adjusted gross income exceeds $500K for married filing joint taxpayers and only $250K for all other taxpayers. Not a very housing friendly provision. And this is simplification?

Effective for sales after 12/31/2017. I did not see any binding contract exception, but you would think there would be one. So someone who has owned their house for 3 years and planned on selling next year and excluding the gain looks to be out of luck. For two more years. The Ways and Means staff commentary is comical. They justify this change as a way to attack certain flippers! Talk about shooting a mosquito with a howitzer.

I see this as a much bigger deal than the property tax and mortgage interest deduction changes.

The vast majority of Americans have most of their wealth in their house. This has consistently not been taxed when it was not a huge windfall. It really is an area where the median American had a chance to amass wealth, and drive one of the biggest engines of the economy (housing).

Now, if you've been in your house for 3 years, and would get a tax bill of 20K, or stay for two more years, what will you do?

At least they could have added a capital losses carry forward for residential real estate - everybody else seems to get this accounting gimmick!

[ToriaT]

Here is an interesting report on taxes. Its really geared for federal retirees but it may have application to others. Scroll down and see about sales tax, which states have personal income taxes, and which states tax retirement pensions and how. The grass may not be greener on the other side. https://www.narfe.org/pdf/StateTaxRo...axYear2015.pdf