Impacts Look To Be Positive
The new tax law brings many changes for individuals and corporations. While some of the individual changes may not appear to be totally positive for home ownership, the net-effect upon housing could very well turn out to be positive. Putting more spending money in the hands of consumers could boost the economy, which would create jobs and more demand for housing.
The new law did not change the benefit of owning and then selling a home as compared to other investments, as the capital gains exclusion for primary residences was not touched. Therefore, while the benefit of tax write-offs may become less important, a home could become an even better investment. In addition to the investment benefit, homes also provide protection against inflation and forced savings plans, while renting provides none of these benefits.
The tax law is designed to put more money in the hands of consumers by lowering the tax rates and increasing the standard deduction. The higher standard deduction will mean that fewer individuals will itemize deductions. The maximum mortgage amount for which interest can be written off has been lowered from one million dollars to $750,000, though this provision does not apply to existing financing in place. Along with the lower maximum loan amount, deductions for state and local income and property taxes are capped at $10,000 starting in 2018 and home equity loan interest is no longer deductible.
Note that the tax law is very new, and the IRS has not issued regulations or instructions to implement the law. This information provided is based only upon what has been published by the media reporting upon the law. We expect many clarifications, and perhaps even technical amendments, to the law in the coming months. We suggest you speak with your accountant for tax advice based upon the new law and for updates as they are issued. If you do not have a relationship with a tax advisor, we would be happy to refer you to one when you have the need.