By Mike Bodeen · 4 December 2017
And other changes
Property Tax Deductions:
This deduction is remaining in place up to a threshold of $10,000 in annual property taxes. Because we are blessed to live in a state with relatively low property taxes, most of us will never go over that amount. Now that the standard deduction will be higher though, I assume that less will be choosing to itemize anyhow. Of course, if you have $10,000 in property taxes, you probably have a rather expensive home and therefore will be more likely to itemize.
Mortgage Interest Deductions:
It looks like the mortgage interest deduction is here to stay, and probably at the $1,000,000 mark that it’s been at. On average, the wealthier an individual, the more likely they are to itemize their expenses as opposed to taking the standard deduction. For these folks with million dollar plus homes, it doesn’t seem like much will change.
Capital gains taxes.
Capital gains taxes are of those things many home owners never think to worry about. This is because most live in their owned homes for longer than two years, at which point the tax is currently no longer triggered.
What’s changing? Now homeowners must live in their homes for five out of eight years before they will be able to escape that taxes imposed on the profits of the sale of their homes. This is especially important to remember in markets like ours where the average homes have been increasing in value, tempting owners to lay hold of their new-found equity and sell more quickly and more often than they might otherwise. It may now not be quite so tempting once the new tax law goes into effect.
Interestingly, a similar change is occurring with our two down payment assistance programs. Currently, and up until the end of this year, folks utilizing down payment assistance don’t have to worry about ever paying back that down payment which was gifted by the government. At the first of this year, that will be changing, where-in that gift will only really be a gift once you’ve lived in the home for 3 years. So if you buy a house using one of these programs after January 1st, of 2018, and you sell your home within three years of owning it, you may be forced to pay back a portion of that amount, depending on how far away you are from that three year mark.
So the take-away we are getting from government and big banks is that it would seem they want the average home buyer to stay in there homes longer. This could have a softening on our listings here in the valley where in the affordable markets we already have a shortage of homes for sale, driving prices up. These new rules coming into play certainly won’t be helping any, as sellers may decided to stay put.
Where will this new supply of affordable homes come from that we so badly need? I haven’t a clue. My guess is we are in for another year of appreciation for the affordable priced markets.