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How The New Tax Rules Will Impact Housing Markets

How the new tax rules will impact housing markets

It will be interesting to see how the new tax rules will impact housing markets.

The revised tax laws cap the amount of property and state income taxes that filers can deduct. This revised law could impact places with higher housing costs negatively. Places like New Jersey, New York, Connecticut and California will most likely take the biggest hit. Another pain point will come from the fact that size of a loan on which you can deduct the interest was reduced from $1 million down to $750,000. These two factors will most likely slow down sales and value appreciation rates in locations where property taxes and home values are highest.

Markets where property taxes and values are more modest could see slight boost.

As Home prices and rents in larger urban centers were skyrocketing in recent years, people have already begun moving from high-cost states to lower cost areas. The recent tax law changes will likely accelerate that trend. According to U.S. Census data that was released recently places like Nevada, Utah and Idaho had the largest percentage of growth in the U.S.¬† from July 2016 to July 2017. Mark Zandi, cheif economist at Moody’s Analytics stated that overall the national impact is likely to be negative. “What this is going to do is it’s going to throw a wet blanket on [the housing market]. It’s still going to move forward, but more slowly,” he said.

The $10,000 cap will impact some more than others.

According to an analysis done by Zillow, A New York homeowner who’s home is in the top-third price tier of the metro area and is also a top income earner would pay more than $23,000 in property and state income taxes. All the while a similary affluent home owner with a top third price tier home in Raleigh North Carolina would pay just over $10,000. A Chicago resident in the same situation would pay about $12,000 in total property and state income taxes while a Nashville resident would pay about $3,000. According to research at ¬†seven states lack an income tax altogether: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Tennessee and New Hampshire do not tax earned income, but they do tax interest and dividend income.





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