How Does the New Tax Plan Affect Real Estate?
Filed under: Mortgage News
A few weeks ago, I shared a video after the new tax bill came through and mentioned how the proposed changes could affect the real estate market. At the time, I promised to share more information as it became available. So, this video is a follow-up to clarify a little more about how the tax bill will likely impact the industry.
Here are a few highlights that I think need to be addressed. Keep in mind that I am not an accountant, and Franklin Loan Center doesn’t offer any accounting services. So, you should always consult with an experienced accounting professional for personal advice.
SALT: State and Local Taxes
The new federal guidelines limit the state and local taxes to only $10,000. For those of us who live in California and have a state income tax, this change is obviously going to be a pretty big deal. So, this could get in the way of writing off property taxes for people who are in the 6-figure earnings range.
Mortgage Interest Deduction
This change will most likely only affect the upper-end of the market. It used to be that the mortgage deduction was only on interest for mortgages up to $1 million, but now it has been reduced down to $750,000. For what it’s worth, that is considered to be a victory because we thought the limit was going to be $500,000.
Capital Gains Exemption
For years, the rule was that you had to live in the house for two out of the last five years to avoid the capital gains tax. There was talk about changing this rule to the last five out of eight years. But, luckily it stayed consistent with the two out of five years rule.
Unreimbursed Employee Expenses
Unreimbursed employee expense is no longer available. So, people who are W2 employees who have unreimbursed expenses for work will no longer be able to write those expenses off on our taxes. The silver lining to the change is that these write-offs actually reduce the listed income for mortgage qualifications. So, the change might make it possible for more people to qualify for lending.
Want more information? Check out this page for an overview that we created. Questions? Comments? Call Bill Provost at Franklin Loan Center in Temecula. (425) 241-1922
