While most tax costs that affect homeowners are determined by the taxing authorities in each state, The Tax Cuts and Jobs Act will affect property ownership for everyone.
Unless Congress does some tinkering with the Act after it was signed into law in December 2017, corporations will receive a massive tax cut as individuals and married couples receive higher standard income tax deductions. Taxable rates are cut in all levels of income for individuals, and the standard tax deduction will double to $12,000. Joint filers will receive a deduction of $24,000.
Homeowners are used to deducting state and local income, property and sales taxes from their federal income tax, but those deductions will be capped at $10,000 annually for homes purchased after December 15, 2017. And the mortgage interest deduction will only be available to those with new mortgages under $750,000, according to Curbed.com, and for existing loans up to $1 million. The same deduction remains in place for second homes, says the The Wall Street Journal.
This could affect homeowners in high-cost areas such as California and New York but proponents of the Tax Act say doubled individual deductions should offset some, most or all of the difference.
Experts are unsure at this point whether or not the changes will affect the housing market, but it could have a terrific impact in some areas, if homeowners decide to wait and see what happens, lowering available inventory and causing prices to rise in mid-cost, high-demand areas like Dallas, Las Vegas and others. As always, please ask your tax professional for the best advice.