The impact of the new tax bill on home ownership

The new proposed tax bill is being marketed as a plan to boost the economy and the middle class. Although I profess not to be an economist or tax expert I am quite nervous about its impact on most Americans who are not in the billionaire class.  Full Tax Plan (500 plus pages) click here.  According to the GOP this is a Christmas gift to all Americans but there are clearly differing perspectives as outlined in yesterdays New York Times article winner or loser?

As a realtor in a blue district I am on the loser list and can ascertain that this bill will not be helping me personally or the real estate market I serve.  For a brief understanding of the plan's impact click Overview.  This highlights the areas to be hit most and I can say for sure that this is a direct way to hurt those of us who live in markets with high costs of living, limited housing and state and local income taxes. 

I predict Home Ownership will likely decrease as it becomes prohibitive to finance a mortgage where the average home exceeds the cap on the new allowable principal.  Existing home owners will be reluctant to move up if they are currently within the allowable mortgage amount as the amount goes from $1M to $750K for new loans after December 15.  The homes that exceed the $1M cap will more likely start to drop in Price as buyers won't be able to deduct mortgage interest.    As noted in the WSJ the plan will hit NY and similiar higher cost regions like a dagger.

The areas where homeowners will be hit specifically include the Mortgage Interest and local property tax deduction.  Home owners will be able to deduct interest up to the first $1M basis of a home for an existing mortgage.  This mortgage had to be on record as of  December 15, 2017.  New loans will be subject to a maximum basis of $750K.  Home equity loan mortgage deductions currently allowed up to $100K will no longer be deductible.  In an area such as Dover and Needham where the median home price exceeds $900K this will surely hurt saleability.   Areas that invest significant tax dollars into public schools and other social services will be further penalized by higher local taxes and less deductibility.  Because the federal government will not have adequate money to fund many "social" programs I fear we may be hit twice.   State and local income tax will be reduced to $10K maximum.

For a brief idea of how the new tax bill will impact you click here.  For those who do benefit from the new plan I will say "Merry Christmas".  For the rest of us I will say may you not feel the burden too significantly in days to come.

Please note that I will continue to post relevant articles to the new tax bill below:



Wendy is a realtor with Coldwell Banker in Needham, Mass.  She loves helping local area buyeres and sellers and also has a national referral base.  Please visit her at wendybcb.com or on facebook @wendybcb.

Relevant articles
click here for estimated Tax Calculator - this was posted today 12/20/17 as result of final bill

Boston Globe 12/19/17 impact on Home Equity
NAR 12/20/17 Tax-reform/the-tax-cuts impact on Homeowners
WSJ 12/27/17 Property tax prepayment
Boston Globe 12/28/17 How to pay if escrow account for Property tax