Will home prices drop in New York if the GOP tax bill passes?
As the tax reform bill pushes towards passage, many people across America are concerned with how the new tax plan may impact their lives and finances. One of the top questions is how the controversial bill will affect the housing market. Recently, the National Association of Realtors (NAR) issued a warning that adoption of the new bill will cause housing prices to drop nationwide. Our Staten Island, New York real estate planning lawyers discuss what changes you could anticipate seeing in the real estate market in the coming years and how you can take advantage of them.
Proposed Tax Bill Limits Homeowner Related Deductions
The tax bill as it is currently written contains several provisions that reduce or eliminate deductions commonly used by home owners. While both the House and Senate bills will keep the mortgage interest deduction, they will adopt restrictions. The House bill would cap new mortgage deductions at $500,000, and only for your primary residence. The Senate bill would keep the mortgage interest deduction for mortgages up to $1,000,000, but eliminate the deduction for equity debt. Additionally, the law would cap the local property deduction at $10,000 under the House bill and eliminate property tax deductions all together under the Senate version.
Investors could also be met with potentially damaging changes. Both the Senate and House proposals would alter existing capital gain laws. The proposals will change the rule to limit the use of the capital gains exclusion to one sale every five years, as opposed to one every two. This represents a significant change for individuals that buy and hold property for investment purposes.
Realtors Warn Home Prices Will Drop
With these changes taken into account, the NAR and other housing experts anticipate that passage of the new tax reform bill could adversely impact home prices. Some states will be more affected than others. According to the NAR, homeowners in New York, New Jersey, and Connecticut, along with several other states, will see the most drastic declines. Prices could dip between ten and 21 percent. Other states could see a less severe drop as well. Homeowners and investors should consult with a real estate planning attorney now to determine what the best course of action is to protect their assets from impending changes.