Tax Cuts & Jobs Act: What Realtors Need to Know
The biggest set of changes in three decades has just been made to the U.S. tax code. The Tax Cuts and Jobs Act will have a strong impact on the entire real estate industry, so it is more important than ever for real estate agents to keep a strong online presence.
The National Association of Realtors (NAR) was actively involved throughout the entire tax reform process and, even though there are still some concerns about how the final bill diminishes the tax benefits of homeownership, NAR helped secure some major improvements before its approval. Here are a few of the provisions that will have an impact on homeowners and homebuyers.
Most Americans will pay lower taxes. The new bill maintains the seven tax brackets and changes the rates and income levels. The lowest level baseline remains at 10% and the highest level is reduced from 39.6% to 37%. Because wealthy home buyers will see an increase in after-tax income, this could make the housing market more competitive by driving prices up.Especially in a competitive environment, it’s important to keep in contact with your prospects and clients. Blogging and social media are great ways to interact online.
The exclusion for capital gains on the sale of a primary residence and the exchange for like-kind real property remains intact, thanks to NAR efforts. This is great news for sellers because the original House bill would have prolonged the amount of time the homeowner must live in their home while eliminating singles with incomes over $250,000 and married couples with incomes over $500,000 from qualifying.Position yourself as an expert by including valuable seller information and testimonials on your website. We can help you professionally showcase your recently sold properties with photos and price information with one of our Sold Listings widgets.
For new loans financed after December 14, 2017, the ceiling on deductible mortgage debt is reduced to $750,000 and existing loans up to $1 million are grandfathered. Interest is still deductible on second homes, subject to these caps. The original House bill would have eliminated this deduction for second homes and restricted the mortgage interest to $500,000. Although the final outcome saw improvements, this could cause challenges for homebuyers who are financing more than $750,000.Share helpful information and resources to attract more buyers to your website. If you have a blog, consider including a Featured Listings post to highlight specific properties.
An itemized deduction of up to $10,000 for the total state and local property, income, or sales taxes is allowed under the new bill. The $10,000 limit applies to both singles and married couples. The House bill would have eliminated the deduction for state and local taxes. In the past, the deduction was unlimited. This change could greatly affect the housing market in high taxed states like New York and California where there is concern that property values and housing demand may decline, and there could be uneasiness among both buyers and sellers in these areas. Stay in touch with your high taxed prospects and clients online. Even if they are not in the market now, they will think of you first when they do decide to buy or sell.
The new bill doubles the standard deduction of $12,000 for singles and $24,000 for married couples filing jointly. As tax incentives for homeowners, this significantly reduces the value of the mortgage interest and property tax deductions, so there will be little or no tax differential between renting and owning for most taxpayers.You’ll want to remind your clients about the privilege of home ownership, the investment, and its association with the mortgage interest deduction. Social media and blog posts are a great way to deliver timely information online.
NAR helped make it possible for many real estate professionals to qualify for the significant 20% business income deduction by providing an exception that eliminates the personal service restriction for real estate agents and brokers with taxable income below $157,500 for singles and $315,000 for couples filing jointly.
Due to the tax changes, along with the low housing inventories, NAR predicts a slower growth rate in home prices of 1-3% this year. Because of the new restrictions on mortgage interest and state and local taxes, high cost and high tax areas may see decreases in price. Although this may be an unsettling time for buyers and sellers, it provides you with an opportunity to help ease their minds and assert yourself as a resource during this transition.