The new tax changes could have a significant impact on the housing market.
As the new Republican tax bill inches closer to passing, housing economists, realtors, mortgage bankers, home builders, and homebuyers are all trying to predict how the industry will be affected.
Currently, taxes on a new home are much lower in the first 12 to 24 months than on a resale home with similar value — but that could all change in the near future.
“This is mostly an issue on the two coasts, where home prices can routinely run $750,000 to $1 million or more,” said Guy Cecala, publisher of Inside Mortgage Finance, who predicts that the new lower limit of $750,000 mortgage interested deductions would impact high priced markets like New York City and San Francisco the most. “In most parts of the country, where the average home price is $300,000, it’s a non-issue.”
According to the Los Angeles Times, there are a few strategies homeowners can implement to prevent financial miscues over 2018:
- Pay property taxes early — If both state and local taxes will be greater than $10,000, a homeowner can pay the second installment bill before 2018 begins.
- Make an additional mortgage payment — Individuals who itemize on their returns could make extra mortgage payments to stay ahead.
- Accelerate or defer income — Families with three or more children could accelerate their income into 2018.
- Use expiring deductions — For some unreimbursed business expenses, the deductions will disappear through 2025.
- Donate to charity — If an individual is itemizing, making a 2018 charitable donation can help.
“Tax advisors are going to be busy [for] the next couple of weeks,” added Greg McBride, chief financial analyst for Bankrate.com.