The Proposed Tax Change and Potential Impact to Home Buyers

Homeowners and the real estate industry have benefited from substantial tax deductions for decades. However in the latest real estate news, changes to these deductions are coming now that the proposed tax plan has been signed into law. What will the fallout to the industry and to homeownership be?

Introducing the Realtor Party

In efforts to 'save homeownership' and leave homeowners as a favored class in the tax code, Realtors nationwide protested, lobbied legislators, and warned clients about the threat of unfavorable real estate market impacts under the new tax law.

How the Changing Tax Codes Could Reduce Home Prices

According to real estate news, the new tax law could make homeownership less attractive, raising the cost and potentially depressing property values. What tax changes could bring this to pass?

• Property Taxes - The new law places a cap on the combined state and local income/property taxes with a single deduction limited to $10,000.
• Mortgage Interest - Under the new law, the standard deduction is almost doubled, so fewer homeowners will itemize, losing the full benefit of the mortgage interest deduction.
• Capital Gains - The qualification time for capital gains exclusions could increase, likely reducing transaction volume as sellers wait longer to list.
• Mortgage Rates - The over $1 trillion the new law may add to the federal deficit could result in more rapidly rising mortgage rates, according to economic theory, raising the cost of financing.

Big Winners... and Big Losers

According to some economists, smaller markets could feel little-to-no effect, while those in high-cost, high-tax areas like NY and NJ could see significant declines in home values—as much as 14 percent by 2019. Other real estate news analysts expect little effect, however, as many households already choose not to itemize. Rising demand/limited supply are expected to continue to drive the market upwards.

To view the original article, visit the Properties Online blog.