Though there were some key changes brought to our real estate market by the new tax reform act, the majority of us won’t be affected by them.
There’s a lot of news out there about the new tax reform act, and we’ve summarized some of the key changes that will impact our real estate market the most.
The first change involves the deduction for property taxes. In the past, if you itemized your deductions, you could deduct the full amount of your property taxes. This deduction is now capped at $10,000.
The second change has to do with the mortgage interest deduction. Previously, this deduction was capped at $1 million, but it’s now capped at $750,000. Any properties that were purchased until the middle of December 2017, though, will be grandfathered into the $1 million deduction.
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For the majority of our Twin Cities market, business will go on as usual.”
One thing that was left unchanged was the length of time you must live in a home to get the capital gains deduction when you sell that home. There was some talk about lengthening the required time frame from two out of the last five years to five out of the last eight years, but it remains at two out of the last five years. The total deduction for married couples, in this case, is $500,000.
The third change is you can no longer itemize your moving expenses unless you’re a member of the armed forces.
The medians sale price in the Twin Cities is right in the $240,000 to $250,000 range, so the vast majority of people won’t be affected by the first change. To approach $10,000 in yearly property taxes, you have to own a home that’s worth $750,000 or more. You won’t be affected by the second change either unless you own a home in the upper price bracket.
These changes may have a different type of impact in other areas where home values are different, but for our Twin Cities market, it will be business as usual.
To learn more about these changes, we advise you to speak to your CTA. If you have any other questions or real estate concerns, don’t hesitate to reach out to us. We’d be glad to help you.