The New York Times recently chimed in on the plight of new home buyers — think water-skiers in shark infested waters.
“You will probably be spending more money at once than you have ever spent in your life, and committing to spend even more money that you don’t have, all while becoming responsible for something that won’t necessarily love you back,” as The Times put it —and doing so during the most tumultuous time in recent history.
The new Republican tax plan approved late last year will obviously affect the housing market — but no one is sure just how. The Times opines that buying a house “will likely become more expensive, especially for buyers who live in high-tax states.” That would be us, folks. Taxpayers used to be able to deduct all of their state and local taxes, including property taxes, state income taxes, and city income taxes, from their federal taxes. Now those deductions are capped at $10,000 — and at $5000 for married taxpayers filing separately.
On a brighter note, the standard deduction has been raised to $12,000 for single filers and married people filing separately, $18,000 for a head of household, and $24,000 for married couples filing jointly. So, in 2018, it may make more sense for taxpayers to take the standard deduction instead of itemizing and taking the state and local tax deduction.
According to Jen Miller who authored the article, tax changes affecting mortgages are also likely to hurt first-time homebuyers — or any of us who can’t afford to buy a home with cash. “That’s because the tax law cut the deduction for mortgage insurance premiums, those monthly payments tacked onto most mortgages when the buyer makes less than a 20 percent down payment,” she pointed out.
Tax laws tilted to favor homeowners have changed in general. The mortgage interest deduction has also been lowered. Mortgage holders could previously deduct mortgage interest of up to $1 million.
With so much uncertainty in the country and the world — yes, the Trump effect — any event that may alter trade, interest rates, tariffs, or immigration could have a negative affect on sales, and Trump is mulling or has already put in motion all of the above changes.
“We’re going to have a year or two or three of price discovery,” said Jonathan Miller, president of the real estate appraisal firm Miller Samuel.