Some last minute changes to tax reform will benefit some Realtors, real estate investors, and homeowners were added to the final bill.
These are the main areas of concern people have about tax reform as it relates to the real estate industry. These changes begin in the 2018 tax year.
1. The capital gains exclusion on a primary residence which allows a $250,000 per individual, or $500,000 per married couple tax free capital gain exclusion on a primary residence sale will remain as it is currently. It requires that you live in the home for 2 out of the last 5 years. This was proposed to go to 5 years out of 8 years. That would have made this exclusion available only after 5 years not 2. That would have been a devastating blow.
2. The mortgage interest deduction will be capped on the interest paid on a $750,000 loan. Previously the mortgage interest deduction was for the interest paid on up to $1,000,000 in mortgage loan, plus an equity line of $100,000. $1,100,000). The interest deduction on a loan up to $1,000,000 originated before October 31, 2017 will still be deductible. The interest paid on a $100,000 home equity line will no longer be deductible.
3. The deduction on state and local tax paid, which includes property tax will be capped at $10,000 a year. This has been unlimited since congress approved an income tax in 1909.
4. Real estate investors- A last minute change will allow most real estate investors to deduct 20% of their taxable (net) rental income. These small businesses would be a pass through, but would not be subject to the limits of a service industry business.
5. Service industry pass through rate - A last minute change to help small business will help Realtors. Until Friday a service industry business would not qualify for the lower pass through rate given to S-corps, LLC’s, partnerships, and sole proprietors. Monday a provision was added that will allow small service industry businesses to be able to the deduct 20% of their net taxable income from the total. Unfortunately , for some reason, this would begin to phase out for those small businesses that earn more than $315,000 for married tax filers and $157,500 for individual filers. For example if you make $250,000 net and are married you would get a $50,000 deduction (20%) and you would be taxed in $200,000 at your normal rate. If you make $315,000 or more this deduction won’t be available to you.
SeeLosAngelesRealEstate.com and Rodeo Realty believes all information to be deemed reliable, but assumes no legal responsibility for its accuracy.
APRIL 20, 2017 BY TERRY ANDERSEN
U.S. mortgage rates dropped for a fifth week, sending home-loan costs down to their lowest point since the week after the presidential election.
The average rate for a 30-year fixed mortgage was 3.97 percent, down from 4.08 percent last week and the lowest since November, Freddie Mac said in a statement Thursday. The average 15-year rate decreased to 3.23 percent from 3.34 percent, the McLean, Virginia-based mortgage-finance company said.
Yields for the Treasuries that guide mortgage costs have dropped on investor expectations that an economy under President Trump won’t be as robust as anticipated, according to Guy Cecala, publisher of the newsletter Inside Mortgage Finance.
“The real factor has been the stock market and investor perception of how the U.S. economy is doing,” he said. “After we saw health-care reform efforts fail, the stock market reacted and investors started rethinking what was doable under a Trump administration.”
The decrease in mortgage rates may encourage homeowners to refinance in the short term as buyers take advantage of lower borrowing costs. An improving job market is increasing demand for real estate as supply of homes for sale tightens. Listings of existing homes for sale are scarcer than they’ve ever been, and bidding wars are becoming more common again in hot markets like the San Francisco Bay area, Denver and Boston.
Article courtesy of Bloomberg.
People often talk about the financial benefits of homeownership, but as studies suggest, there are also social benefits of owning your own home.
The National Association of Realtors recently released a study titled, 'Social Benefits of Homeownership and Stable Housing.’ The study confirmed a long-standing belief of most Americans:
“Owning a home embodies the promise of individual autonomy and is the aspiration of most American households. Homeownership allows households to accumulate wealth and social status, and is the basis for a number of positive social, economic, family and civic outcomes.”
“In addition to tangible financial benefits, homeownership brings substantial social benefits for families, communities, and the country as a whole. Because of these societal benefits, policy makers have promoted homeownership through a number of channels. Homeownership has been an essential element of the American Dream for decades and continues to be so even today.”
“The prevalence of homeownership is not universal. Across different demographic groups and even within different regions of the country, the homeownership rate varies widely. Many of these gaps are long standing. Therefore, the social benefits of homeownership differ widely from community to community.”
Here are some of the major findings on this issue revealed in the report:
The positive social benefits from homeownership and stable housing are compelling, and there is evidence from numerous studies that attest to the benefits accruing to many segments of society. Even after considering the effect of the recent housing downturn, many studies found that homeownership still provides a variety of social benefits. Homeownership boosts the educational performance of children, induces higher participation in civic and volunteering activity, improves health care outcomes, lowers crime rates, and lessens welfare dependency.
Adapted from the “Social Benefits of Homeownership and Stable Housing” study conducted by the National Association of Realtors in December 2016.