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Will the New Tax changes + other stuff = slower home appreciation?

Home Mortgages and Home Buying Will the New Tax changes + other stuff = slower home appreciation?

  • Avatar Tangler 
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    I have been thinking of this stuff since the law passed,  but I think a lot of people don’t look at taxes until they file in a few weeks. I wonder if after they file and realize that the 24k standard deduction will make it less likely for mortgage interest to be deductible will make people think twice about borrowing huge?
    Do you think the 1. record home increases + 2. Dropping/stagnant stock market + 3. unfavorable tax deduction for mortgage interest = slower increase in home appreciation?
    Thought? Crystal ball?
    (sorry late edit: I forgot to mention rising Interest rates: throw that in there too please)
    #186597 Reply
    Avatar amphora 
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    In the short term, the capping of the mortgage interest deduction probably will slow down the real estate market. But in regions with a strong economy and limited housing supply, it may have a limited effect.

    Given the historic unpopularity of Trump’s “tax reform”, I expect there to be major reversal of the tax changes by the next president. Tax policy is often modified, but I expect this tax policy to be especially temporary. Don’t let the tax tail wag the dog.

    #186607 Reply
    Liked by Tangler
    jfoxcpacfp jfoxcpacfp 
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    I just don’t think the connection is there. And I don’t believe the stock market is dropping and/or stagnant. This is just typical of what the market does in the short term. For the last 9+ years, we have had very little typical volatility so a lot of people now think it is a-typical, particularly those who have had relatively less time in the market.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #186608 Reply
    Liked by Tangler, Zaphod, jz
    Zaphod Zaphod 
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    How many people did this apply to in the first place? Not many. As for the capping its at 750k, which still includes most of the homes in america and is only 250k from the limit prior. Those limits never stopped people from buying more expensive homes anyway, so I dont think it will change much. Theres a couple years where its different, than it will simply be the way it is and no one will think much about it.

    Lots of people have no idea whats going on with their taxes and likely most of the people who casually toss around the ‘tax breaks’ from mortgage/etc…were never getting them in the first place as they couldnt itemize.

    For the people that could, its a rather small change, but in certain locales the SALT change does hurt a bit. But people buying fancy houses in fancy places werent doing it for tax reasons in the first place. Also you have the AMT offset and while people may whine about it, lots of calculations seem to imply its a wash. We’ll see after everyone files I guess.

    #186611 Reply
    jfoxcpacfp jfoxcpacfp 
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    Also you have the AMT offset and while people may whine about it, lots of calculations seem to imply its a wash. We’ll see after everyone files I guess.

    Click to expand…

    Believe it or not, almost all physician clients who we ran projections for at the end of the year were on track for a lower effective tax rate than the prior year. I think that is very interesting and it was a little surprising to me. Will get to see the actual results as tax season progresses and looking forward to what we learn.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #186615 Reply
    Liked by Zaphod
    Zaphod Zaphod 
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    Also you have the AMT offset and while people may whine about it, lots of calculations seem to imply its a wash. We’ll see after everyone files I guess. 

    Click to expand…

    Believe it or not, almost all physician clients who we ran projections for at the end of the year were on track for a lower effective tax rate than the prior year. I think that is very interesting and it was a little surprising to me. Will get to see the actual results as tax season progresses and looking forward to what we learn.

    Click to expand…

    Its what I would guess for most. Given the big discount right at the meat of most physicians incomes, it really will be a select few that have any issues.

    #186616 Reply
    Liked by Tangler
    Avatar Peds 
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    slower increase in home appreciation?

    Click to expand…

    as we are not home owners, i think thats a fine outcome.

    #186618 Reply
    Liked by Tim, Tangler
    ENT Doc ENT Doc 
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    More than happy to see the mortgage interest and real estate taxes limited.  No reason for the government to be propping up a specific industry, especially given the mountain of debt we have.  I agree that the tax law will be modified – probably sooner than the sunset provisions inherent to the law.  Raising the corporate rate back would be pure stupidity IMO.

    #186623 Reply
    Zaphod Zaphod 
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    More than happy to see the mortgage interest and real estate taxes limited.  No reason for the government to be propping up a specific industry, especially given the mountain of debt we have.  I agree that the tax law will be modified – probably sooner than the sunset provisions inherent to the law.  Raising the corporate rate back would be pure stupidity IMO.

    Click to expand…

    Depends where they raised it to. 25% would be fine, applied to all not just mega corps, etc…

    #186625 Reply
    Liked by iradoc
    ENT Doc ENT Doc 
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    More than happy to see the mortgage interest and real estate taxes limited.  No reason for the government to be propping up a specific industry, especially given the mountain of debt we have.  I agree that the tax law will be modified – probably sooner than the sunset provisions inherent to the law.  Raising the corporate rate back would be pure stupidity IMO.

    Click to expand…

    Depends where they raised it to. 25% would be fine, applied to all not just mega corps, etc…

    Click to expand…

    You want business and investment here.  Reduce the rate to something modest that supports governmental protections and regulations necessary for C-corps, and assess the additional tax to make up for the losses at the individual level (dividend and cap gains taxes, for example).  Taxing businesses when tax is or can be assessed at the individual level is nothing more than a money grab and decreases investment/growth.

    #186633 Reply
    Liked by Tim, portlandia, iradoc
    MPMD MPMD 
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    How many people did this apply to in the first place? Not many. As for the capping its at 750k, which still includes most of the homes in america and is only 250k from the limit prior. Those limits never stopped people from buying more expensive homes anyway, so I dont think it will change much. Theres a couple years where its different, than it will simply be the way it is and no one will think much about it.

    Lots of people have no idea whats going on with their taxes and likely most of the people who casually toss around the ‘tax breaks’ from mortgage/etc…were never getting them in the first place as they couldnt itemize.

    For the people that could, its a rather small change, but in certain locales the SALT change does hurt a bit. But people buying fancy houses in fancy places werent doing it for tax reasons in the first place. Also you have the AMT offset and while people may whine about it, lots of calculations seem to imply its a wash. We’ll see after everyone files I guess.

    Click to expand…

    As someone who lives in (relatively not locally) fancy house in a relatively fancy place, well said!

    #186648 Reply
    Liked by Zaphod
    Avatar StarTrekDoc 
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    It will slow high end/VHCOL cost appreciation as the cap will do that.   BUT, it will also inflate the middle and lower end as the SALT limits in combination of a higher standard will squeeze out the middle class dream of home ownership.

    Subsequently, the rental market will have higher demands, pushing up rents.  Making the profit margins for landlords a bit better and incentivizing folk into rental real estate — and causing appreciation valuations in that market of SFH/duplexes especially in my opinion.

    Plus you get the tax relief on profits for LLC real estate –  it’s relatively easy to keep under 300k with depreciation markers — it’ll be a boon for rental landlords.  —  So it’s a mixed answer on home appreciation.

    Entry level homes will get more expensive.   High end ones will plateau. — middle class renters will be the losers on all this.

    #186649 Reply
    Liked by Tangler
    Zaphod Zaphod 
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    More than happy to see the mortgage interest and real estate taxes limited.  No reason for the government to be propping up a specific industry, especially given the mountain of debt we have.  I agree that the tax law will be modified – probably sooner than the sunset provisions inherent to the law.  Raising the corporate rate back would be pure stupidity IMO.

    Click to expand…

    Depends where they raised it to. 25% would be fine, applied to all not just mega corps, etc…

    Click to expand…

    You want business and investment here.  Reduce the rate to something modest that supports governmental protections and regulations necessary for C-corps, and assess the additional tax to make up for the losses at the individual level (dividend and cap gains taxes, for example).  Taxing businesses when tax is or can be assessed at the individual level is nothing more than a money grab and decreases investment/growth.

    Click to expand…

    If everything was treated as pass through that’d be great and seemingly simple(?).

    #186653 Reply
    Liked by Tangler
    Avatar Dusn 
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    Status: Physician
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    It shifted my rent vs buy calculator strongly to the rent side. So I decided to continue to rent instead of buying a home this past year and likely will continue to do so.   I’m not sure what percent of the public actually pays attention to their finances/taxes like this though.

    #186656 Reply
    Liked by Tim, docnews, Tangler
    Avatar bean1970 
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    Status: Physician
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    Joined: 07/12/2017

    for the average American, their mortgage deduction didn’t even exceed the standard deduction even when it was at 12K for MFJ, even more so as years go by and there is more principal and less interest on people’s mortgages. We as physicians have skewed view because we tend to live in higher priced homes with heftier mortgages. As a whole i doubt the housing market has any direct relation to the taxes, more so for interest rates on the loan itself and just generally cyclical trends.  other than few geographic pockets here and there, the entire home appreciation is somewhat of a myth IMO…by the time one adds in every single cost they dumped into a home over the time they live in it (interest, taxes, insurance, yard care, upkeep, painting, gutter cleaning, replacing appliances, on and on)….it probably is a money suck and appreciation is slow at best.
    i would hedge it will slow more from upcoming homebuyers riddled in debt along with valuing “experiental” matters (whatever makes a good Instagram post) rather than material things and the ability to be more mobile. If they do want a home, they will want something green and efficient…not a giant doctor house. At least this what i see with my kid and his college friends and many of the newer medical students and how they see their futures, mostly without any interest in home buying as a long term goal.

    #186657 Reply
    Liked by docnews, Tangler

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