The new tax bill that passed in December was the biggest overhaul of the tax code since 1986, and many of the changes will end up having a direct impact on the housing market. Here is a summary of just the changes that will affect your real estate investments in the coming year.

The IRS has just released the 2019 tax tables, but for our purposes today we'll be writing about the 2018 tables. So, for 2018, standard deductions will increase to $12,000 for individuals and $24,000 for married couples filing jointly. This is coupled with the change in mortgage interest deductions. According to a recent Forbes article, "If you buy a home between now and 2026, you can deduct the interest on up to $750,000 in a mortgage debt used to purchase or improve it as an itemized deduction. This cap affects home purchases made after December 14, 2017." If you purchased your home in 2017, but before December 14th, you will be able to deduct interest on up to $1 million (the old cap) on that home. Time will tell if this creates a disincentive for those currently living in homes valued at, or over, $750,000 to move; as the new bill tends to treat current homeowners better than future buyers. 

Another large change is the bundle of state and local tax deductions. "Under the old law all property taxes paid to state and local governments could be claimed as an itemized deduction... the new law bundles all these "SALT" taxes together and limits the deduction, in total, to $10,000 for both individuals and married couples" continues Forbes staff, Samantha Sharf. This will be another blow to those in homes valued over $1 million; and those in states with high property tax rates. 

The National Association of Realtors (NAR) has been worried the overhaul of taxes could lower home prices by 10% in every state and weakened the already oversupplied luxury home sector. Though, admittedly, NAR also states that the effects will vary depending on state taxes, median home values already in place, and foreign buyer impact. Because Washington has no state income tax it will be interesting to see how the federal tax changes impact our market. With the changes still so fresh, I highly recommend keeping an eye on the news and keeping yourself informed. As always, if you have real estate questions or concerns about your taxes I would be happy to connect with you.