While there are winners, losers, and others, when it comes to the recently passed, tax reform legislation, this article will review, some of the effects and potential ramifications, as they specifically related, to real estate. Even within this topic, commercial properties, rental properties, and real estate management companies, appear to, potentially be significant beneficiaries, while, some homeowners, will discover, either little impact, or a negative one! This article, will attempt to, briefly review and examine, 5 examples, and consider the overall impacts, etc.
1. $10,000 State and Local Taxes, Cap: In the past, homeowners could deduct the entire amount of their real estate taxes, as well as state and local taxes paid. The new law changes that significantly, capping the deduction, at a maximum of $!0,000 per year. For example, where I live, in Nassau County, Long Island, New York, every evaluation, states, we will be, the most adversely affected area, in the nation. This capped amount is insignificant in a region, where our so – called, SALT taxes, are significantly higher, and thus, most envision, it having a negative impact, on the values and selling prices of these homes. When real estate tax, was fully deductible, it enhanced the comparative value of owning, versus renting, and, thus, the economists, and experts in this area, are anticipating, at least a 10% drop in pricing, because of this. Wouldn’t that make ownership less desirable, and, thus, have an undesirable effect on everything related to real estate, in certain, specific regions, of the country?
2. $750,000 Mortgage, maximum mortgage interest deduction: Presently, mortgage interest is tax – deductible, on loans, up to a million dollars. This law changes that, to $750,000, instead, on new mortgages. Especially in areas, where home prices, were $950,000, and above, this might be expected, to have an adverse impact on home sales, the real estate industry, and, on mortgage lenders.
3. Buying versus renting: First – time buyers often weigh, and/ or balance, home ownership, versus, renting! They often, factor in, potential appreciation, of the ownership asset of a house, as well as the deductability of real estate taxes and mortgage interest, into this consideration, and thus, those owning rental properties, might profit, while others suffer!
4. Pricing, and vacation home ownership: Owning a second, or vacation home, becomes more challenging and problematic, because, no longer, will the real estate taxes, and/ or mortgage interests, on these properties, be tax -deductable. The overall impact on pricing of most types of residential housing, will certainly not benefit, present owners, hoping to sell their houses, etc!
5. Home sales: When the real estate market, suffers, the overall economy, does not generally prosper! We will see, commercial properties, benefit, in terms of their pricing, and returns on investment, while residential homes, in many parts of this nation, will become, far more challenging to sell, at a desirable (to the present owner) price. Since, for most people, the value of their home, is their single largest financial asset, this could create, a situation, where, many, witness, an unforeseen, financial/ economic loss!
Wake up America, because there are ramifications to everything, and this legislation, creates a few winners, many, who will tread – water, and many losers! Be prepared, and proceed wisely!
Richard has owned businesses, been a COO, CEO, Director of Development, consultant, professionally run events, consulted to thousands, conducted personal development seminars, for 4 decades, and a RE Licensed Salesperson, for a decade+. Rich has written three books and thousands of articles. Website: http://PortWashingtonLongIslandHouses.com and LIKE the Facebook page for real estate: http://facebook.com/PortWashRE
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