4 Important Impacts Caused by the New Tax Bill
What does the new tax bill mean for the Charleston housing market? There are four changes you need to be aware of:
1. Property tax deductions. Prior to the new tax bill, if you could itemize your deductions, you could deduct all of your property tax. Going forward, however, the amount will be capped at $10,000 per year. If you had property taxes, this will make homeownership more costly, which could cause negative pressure on home price.
2. The limit of deductible mortgage debt has been reduced to $750,000. This will make purchasing homes over $750,000 more expensive because they won’t be able to deduct that mortgage debt beyond that limit. For high-end purchasers and high-end homeowners, it will make homeownership more costly.
3. Exclusions for capital gains. If you sell your home and turn a profit, up to $500,000 of that profit is tax exempt from capital gains. Earlier versions of the bill required you to live in a home for five of the last eight years. They repealed that, leaving it at two of the last five years.
4. The moving expense has been repealed, except for those who are members of the armed forces.
These are the most tax-relevant changes for real estate. Three of the four will have a negative effect on home prices because it’ll make owning a home more costly. We get fewer deductions, but right now in the market that we’re in, it won’t affect us going further into 2018.
We can anticipate that these changes will have effects in the long-term, especially as we see the market change from a seller’s to a buyer’s market. We don’t know when that will be exactly, but when the market shifts, we’ll see that these changes will have a dramatic effect on home prices.
If you have questions about taxes or real estate, feel free to reach out to us. I’d be happy to help.