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I'm surprised this particular provision in the House bill was not bigger news. It would indeed have hurt real estate in many markets throughout the country, and particularly hurt people who bought wisely into rapidly appreciating markets. To modify it to 5/8 would have significantly impacted sales volume in rising markets and hurt a lot of middle class people who planned to roll their equity into a new house. Stupid, stupid way to tax. It would have skyrocketed rents and prices even more in places like California and Colorado, because a LOT of homeowners would have remained in their houses for another couple years, further reducing inventory.
Since I read a good 1/3rd of the final bill related to individual taxes and scanned the rest... my takeaway is that they removed a lot of the medicine and kept a lot of the goodies, at least temporarily. This is how they picked up a few more of the blue state Republicans.
Most of the goodies go away for individuals after a few years. The business taxes stay. Businesses are getting an enormous tax break, forever. This will explode the deficit in the next few years. Bigly.
I don't expect real estate to get hit that hard now and continue more or less on the same path. The mortgage deduction changes may make some marginal changes, especially to high cost markets like New York City.
Right. There is no way I can make the 5/8 but 2/5 is fine.
To find out the 2/5 law wasn't changed is a nice Christmas present.
I may well move to a lower state and local tax state then where I am in Plano, Tx in 2019 in part due to this change in handling SALT taxes. I am planning to pay 2018 property tax partially early this week to get my SALT taxes for 2018 down to the $10k deduction limit then move to a state like Tennessee where I can live in house similar to my $15k property tax house in Plano. With the low property taxes and tax on dividends the only income related tax in TN now, I should still have room for claiming $2 to 3k of sales tax and staying under the $10k limit.
Some moves like this may be pushed with the new tax bill but I might have moved without the law but this makes it more attractive to me than before. I see one can not pay 2018 state income in 2017 to claim it and avoid the loss of deduction in 2018 due to the $10k limits but see nothing to limit my option of paying property tax in 2017 for 2018 and deducting ti in 2017 on fed tax return. This difference in treatment of income and property tax is probably due to the fact many pay their property taxes into an escrow account so they didn't want to complicate that with the law change
I'm not sure this discussion was intended to be limited to the MID and the rules around what may be considered a flip... there are certainly consequences to the RE market from this holiday gift. SALT cap. Lower tax bracket breaks set to expire. Savings tied to child care credits, which expire (when your kids age out).
There doesn't appear to be much in this plan to help the average homeowner over the long run and certainly will change the dynamics of home purchasing in property tax heavy metros.
While flipping will certainly be an issue in my market (Long Island) a far bigger issue is loss of the SALT deduction. Especially with second homeowners. I am selling a 700,000 house with $19,000 taxes and a large insurance bill, because it falls at the edge of a flood zone. MANY of my 2nd home buyers are just regular people who live in town in Nassau County with high tax rates, looking at houses in the 400,000 as a second home.
It seems like every six months I get an email from NAR urging me to email my elected officials (thank you for including the link in the email) and to demand in my loudest voice why we do not need (or need) the proposed legislation. In the past 30 years, there has not been any legislation with enough impact to rock my world. Even the most detested, Dodd Frank Bill, has not had a negative impact on my business or my income.
I think most industry professionals just roll with the change. If the impact is a grave as touted, it will be reversed. But change is the only constant in our industry.
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