How does The Tax Cuts and Jobs Act impact the real estate market? I’ll go over a few changes in the tax reform law that you should know about.
How will the tax reform law impact you with regards to real estate? There are a couple of things that were good for real estate, and a couple that aren’t so good for real estate.
First of all, there are the changes to the mortgage interest deduction. That went against us a little bit, but it’s not completely horrific. The mortgage interest deduction cap went from $1 million to $750,000.
The good news is that the capital gains tax exclusion remains. You only have to have lived in the house for two out of the last five years in order to qualify for the exemption. If you’re married, that’s $500,000 worth of gains that you won’t have to pay taxes on; if you’re single, that’s $250,000 worth of gains that you won’t have to pay taxes on.
There are a couple other small things to pay attention to. If you previously did a line item deduction, it was unlimited. Itemized deductions are now capped at $10,000. Finally, unless you are in the military, you will be unable to deduct any moving expenses on your taxes.
According to the National Association of Realtors, this may cause as much as a 10% dip in the real estate market. On the other hand, if this bill causes people to stay on the sidelines instead of putting their homes on the market, that could work in your favor if you decide to sell your home.
Ultimately, the jury is still out in regards to whether this will positively or negatively impact the real estate market. I will provide more information as we go along.
In the meantime, if you have any other questions about the real estate market, just give me a call or send me an email. I would be happy to help you!