TAX REFORM - Its Impacts On California Real Estate
(This is a printable version)
While the Tax Reform had been widely anticipated we are sure there are many caught a little by surprise.
Our personal opinion is the changes are great for the overall US economy but will likely bring a little discomfort to many California home owners and could bring a lot to the wealthier individuals in those states with high state income tax and property tax rates.
It is still early in the information distribution and education process. Most CPA's will receive the new tax codes by the end of January. At that time the way this impacts each of us personally will become more evident.
In the meantime, many organizations are studying, analyizing and disseminating industry specific impacts to its constituents.
As it relates to REAL ESTATE, the CALIFORNIA ASSICIATION OF REALTORS (CAR) has prepared some preliminary information for Realtors to share with their clients.
Below is a comparison prepared by CAR. We have other information they have prepared and would be glad to share it upon request.
The following chart was prepared and provided by the California Association of Realtors (CAR). A copy is available at this link.
|Prior Law||Current Law|
|Mortgage Interest Deduction||Capped at $1,000,000||Capped at $750,000 on Mortgages generated after December 14, 2017.|
|State and Local Tax Deduction (SALT)||Unlimited||The total of Income, Sales and Property Tax deductions is capped at $10,000|
|Capital Gains Exemption on Sale of Primary Residence||Exclusion of up to $250,000 ($500,000 if married) of gain realized on sale or exchange of principal residence if lived in for 2 of last 5 years||No change|
|1031 Like-Kind Exchanges||Applied to all classes of property (e.g., personal and real||Limits non-recognition of gain to real property|
|Standard Deduction||$6,350 individual and $12,700 if married||$12,000 individual and $24,000 if married|
|MID for second Homes||Capped at $1,000,000||Capped at $750,000|
|Home Equity Loan Deduction||Capped at $100,000||Not deductibleunless the proceeds are used to substantially improve the property|
|Moving Expense Exclusion andDeduction||Deduction for moving expenses incurred in connection with change in work place||Deduction for moving expenses incurred in connection with change in work place|
|Child Tax Credit||$1,000 for each child||$2,000|
|Deductionfor Qualified Business Income of Pass-Through Entitiesincludingindependent contractors||None||20% deduction of taxable income phased out above $157,000 ($315,000 if married) for brokerage services|
|Depreciation Recovery Period for Real Property (Residential Rental)||Recovery Period is 27.5 years||No Change|
|Depreciation Recovery Period for Real Property (nonresidential)||Recovery Period is 27.5 years||No Change|
|Depreciation Recovery Period for Real Property (Leasehold improvements)||Recovery Period is 27.5 years||No Change|
The reports found in the links below are for the end of the third quarter of 2017. Each is a full report for the specific neighborhood. Our next Newsletter will have these reports updated through the end of 2017. The Year-end reports are finished and available upon request. If you need to see the Year-end Results, please contact us. It would be our pleasure to share them.
We have data on about 32 neighborhoods can develop a report for any neighborhood in California.
We anticipate this could make it harder for buyers to qualify.
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