2018 Newsletter from Dorothy Liu
The good news is that majority of Americans should see a reduction in their tax rates by 2-3% and owing less in income taxes. Personal exemptions are gone, but standard deductions have doubled to $24,000 for joint filers and child tax credit increased to $2,000.
The bad news is that the tax benefits for homeowners are greatly reduced. The mortgage interest deduction(MID) is capped at $750,000 for new loans after 12/14/17. State, local and property tax(SALT) reductions have a total cap of $10,000 whether filing as individual or jointly. 1031 Exchange limit treatment to real property only, personal property not allowed.
The impact for Silicon Valley is estimated by NAR to homeowners that they will lose over $50,000 in SALT deductions, and another $8,300 due to the cap in the MID. So the net result according to CAR will be a 4% decrease in home prices and 3% decline in home sales. To make it easier to understand the changes, See:
Short summary of the Act with examples and Q&A are available
The economist say home prices will keep rising although the gains will be smaller. Since the supply of home fails to keep pace with demand, the bidding wars will continue. Rents will keep rising and vacancies will stay low.
Locally, with low inventory, multiple offers, strong economy, we saw homes selling in Santa Clara and San Mateo counties faster in 2017 and at higher prices.