How does the new tax reform law impact the Nashville real estate market? I’ll explain a few key points today.
Congress recently passed new tax legislation. How will the new tax reform law impact the real estate market in 2018?
This is the biggest tax reform since the mid-1980s. Before we begin, I recommend sitting down with your CPA to determine your exact situation regarding your life, your income, and your personal living.
That said, how does it impact the real estate market?
First, there were changes made to state and local tax deductions. It used to be that you could deduct anything as far as state and local taxes go. Now, there is a cap on the amount you can deduct. That cap is only expected to impact higher income households though, as we did see reductions in the overall tax rate across the board.
Again, check with your CPA. For the majority of homeowners out there, you should owe less in taxes this year than in previous years.
No changes were made to the capital gains exclusion.
There were also changes to the mortgage interest deduction. In the past, there was no limit to the mortgage interest deduction. Now, it’s limited to interest on loans up to $750,000. If you own a home that is greater than $750,000, consult your CPA.
Folks were worried that the mortgage interest deduction would go away entirely, but that was evaluated and the mortgage deduction cap was changed to $750,000.
The other thing people were worried about was the capital gains exclusion. You have to live in your home for two out of the last five years before you sell it in order to avoid paying taxes of up to $500,000 in capital gains. Congress was considering bumping that up to five years, but thankfully, they were able to negotiate that down.
I hope this information helped you better understand how the tax reform law impacts our real estate market.
In fact, 2018 may be the best year to buy your first investment property. I’ll talk about that more in our next video.
In the meantime, if you have any questions about real estate, just give me a call or send me an email. I would be happy to help you!