As most of us were trying to enjoy the holidays with our family and friends, many people were worried about the new tax codes being voted on in Congress, especially the ones affecting the future of Real Estate in the US. There was lots of media hype and proposals, but here's the facts on what actually passed.
3 Biggest Concerns for Real Estate
1. Mortgage Interest Deduction
- What it used to be: Mortgage interest was deductible on loans up to $1,000,000.
- What was proposed: Mortgage interest is deductible on loans up to $500,000
WHAT PASSED: Mortgage interest is deductible on loans up to $750,000
Chicagoland impact: Only 11% of the homes currently on the market here would require a mortgage of $750,000 or more
2. SALT (State and Local Taxes)
- What was proposed: Elimination of this deduction completely
WHAT PASSED: Allows for itemized deduction of up to $10,000 for both local property taxes and income taxes
Chicagoland impact: We are one of the highest property taxed states, therefore this will have an impact here, but mostly for people in the upper tax brackets.
3. Capital Gains Tax
- What it used to be: Live in a home a minimum of 2 out of 5 years to pay nothing in capital gains tax
- What was proposed: Live in home a minimum of 5 out of 8 years.
WHAT PASSED: NO CHANGE, still 2 out of 5 years.
Impact: NONE
Overall, the new tax code seems to affect a small amount of Americans. Economists have predicted that it will not decrease home values, but instead continue on an upward trajectory with a slower percentage of appreciation. Also, with the doubling of the standard deductions, that should offset some of the above changes and ultimately puts more money back in taxpayers pockets.
For a detailed nationwide map, check out the article below:
Disclaimer: This guide is not meant to be a resource for tax advice but instead basic information concerning only certain aspects of the new tax code and how they may impact the real estate market. You should get tax advice from your accountant, who will explain how the entire tax code will affect your personal return.
