Understanding the New Tax Law and How It Affects Buyers, Sellers and the Housing Market

Understanding the New Tax Law and How It Affects Buyers, Sellers and the Housing Market
A new year and a new tax law are now a reality, but what does that mean for current property owners and the housing market?

More specifically exactly how will the new tax law affect you?

Many people are concerned about the new tax code changes and rightfully so. This in itself is enough to affect the market.

The Standard Deduction Changes

The good news here the standard deduction with the new tax law is almost double the old one. The deductions are as follows:

  • Single filers – the standard deduction went from $6,350 up to $12,000.
  • Married filers – the standard deduction went from $12,700 up to $24,000.

What About the State, Local, and Property Tax Deductions?

State and local taxes, also referred to as salt, will stay the same for everyone who itemizes. However, there is now a $10,000 cap on those deductions. Under the old law, filers were able to deduct an unlimited amount for their state taxes, local property taxes, as well as income and sales tax.

What Could Have Happened But Didn’t

As the saying goes “it could have been worse.” Here are some of the changes that could have happened but didn’t.

  • The initial versions of the tax plan eliminated property tax deductions completely.
  • There was a clause that would have reduced the mortgage interest cap even more than the current version.
  • The previous versions of the bill would have increased the ownership and use requirements from two of five years up to five of eight years. This one change alone would have prevented high-income taxpayers from being able to claim the exemption at all.

The Mortgage Interest Deduction

If you are a current homeowner, nothing has changed, you will still be able to take the same mortgage interest deduction you’ve always taken. However, going forward, when you buy a new home, your mortgage interest deduction will only be allowed on the interest paid on mortgage debt of up to $750,000. Under the old law, you were allowed to deduct interest paid on mortgage debt up to $1 million.

How the New Tax Law Simplifies Things

Fortunately, even if the salt and mortgage interest changes don’t affect you directly, your net-after tax housing costs will stay the same since the standard deduction has been doubled. That means, in most cases, the increase in the standard deduction will eliminate any benefit you would get from itemizing because the combination of the mortgage interest and the $10,000 salt deduction will not exceed $24,000. This alone will simplify the tax process!

Are There Any Changes to the Capital Gains Tax?

There are no changes for anyone selling their primary residence. If you’ve owned your home for two of the last five years, you won’t own any capital gains taxes based on the following:

  • Single sellers – no taxes on the first $250,000 gain.
  • Married sellers – no taxes on the first $500,000 gain.

What About Moving Expenses?

A bit of a disappointment here. Moving expenses can no longer be deducted when you’ve had to move for your job. However, there are some exceptions for those in the military.

2017 Versus 2018

The new tax law will not affect your 2017 taxes. The changes are only applicable going forward. And as far as how all of this will impact the local housing markets, only time will tell.

There’s no need to negatively speculate anything at this point. We should all try to remain positive and hope this new law will make the impact hoped for while leading our country in the right direction.

What’s Next?

If you are thinking about buying or selling a home in Silicone Valley, or you have some questions about how the new tax law will impact your decision, please Contact Suzanne Freeze-Manning today. Suzanne has a business background and is a 20-year veteran of the real estate industry. Therefore, with her market knowledge, negotiation skills, and transaction management experience, she is the absolute best advocate for buying or selling a home in this ever-changing market.

Recent Blog Posts

Stay up to date on the latest real estate trends.

The Best (and Worst) Day to List Your Home

Suzanne Freeze-Manning  |  February 19, 2023

When to list your Los Altos property for the highest possible sale price.

Suzanne Freeze-Manning’s Ultimate Guide to Selling Your Home in Los Altos

Suzanne Freeze-Manning  |  December 8, 2022

Useful tips for selling your house with ease.

See How Easily You Can Sell a Home With a Real Estate Agent You Trust

Suzanne Freeze-Manning  |  November 21, 2022

When you trust your real estate agent, you can be assured that they have your best interests in mind and will keep you informed throughout the process of selling your … Read more

Silicon Valley Real Estate Market Forecast 2023

Suzanne Freeze-Manning  |  October 31, 2022

What factors influence a change in the current real estate market?

Here’s Why you Need an Expert for your Next Home Renovation

Suzanne Freeze-Manning  |  October 3, 2022

Eight reasons why it’s better not to DIY.

The Benefits of Working With a Full-Service Real Estate Agent–Trust Your Agent

Suzanne Freeze-Manning  |  August 31, 2022

Whether you are a buyer or a seller, one of the best things you can do is work with a full-service real estate agent.

How To Get The Best Price For Your Los Altos Home

Suzanne Freeze-Manning  |  August 31, 2022

The best techniques and tools to use to get an ideal price for your Los Altos home.

Sell Your Home in San Jose at Peak Market Price!

Suzanne Freeze-Manning  |  March 28, 2018

The housing boom is hot right now in Silicon Valley.

Understanding the New Tax Law and How It Affects Buyers, Sellers and the Housing Market

Suzanne Freeze-Manning  |  January 25, 2018

A new year and a new tax law are now a reality.

Work With Suzanne

Communication is the key to client satisfaction and I work hard to ensure all questions are answered and needs met. Purchasing or selling a home is one of life's biggest investments and can be one of life's most satisfying rewards. My commitment to be with you every step of the way will ensure a smooth, efficient and successful experience.