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Home Sellers - Tax Reform
Here is what Home Sellers need to know about the Tax Cuts and Jobs Act that was signed into law December 2017. Courtesy of
California Association of Realtors.
CAPITAL GAINS EXCLUSION:
Remains unchanged at $250,000 for single filers and $500,000 for joint returns if the house was lived in for two of the
last five years.
Moving expenses are no longer tax deductible, except for members of the Armed Forces.
California's median home price is projected to increase 3.2 percent in 2018, which is good news for home sellers.
Taking into account the impact of tax reform, home sales in California are expected to increase 0.3 percent in 2018.
Demand for homes priced $600,000 and below will remain strong, due to limited housing inventory.
Homes priced $750,000-$1 million could experience a decline in sales of up to 0.9 percent. The supply of available homes
for sale also will be slightly impacted, as homeowners may delay trading up/down to their next home.
Properties priced below $500,000 may see an approximate 4 percent increase in price.
Properties valued at $750,000 may see a price increase of 2.4 percent, while properties at the higher end could inch up
1.5 percent.
Properties priced between $1 million and $1.5 million could still see some appreciation overall, but will likely be at
a growth rate of less than 1.5 percent.
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Homeowners should know about Tax Reform
Homeowners need to know about the Tax Cuts and Jobs Act signed into law December 2017. Courtesy of California Association
of Realtors.
The limit on deductible mortgage debt was reduced from $1 million to $750,000 for new loans taken out after 2/14/17. Current
loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap.
Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as
the new loan does not exceed the amount of the mortgage being refinanced.
Interest paid on home equity loans is only deductible if the proceeds are used to substantially improve the residence.
Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits.
DEDUCTION FOR STATE + LOCAL TAX (SALT):
If you itemize your tax return, you can claim up to $10,000 total for state and local property taxes and income or sales
taxes. This $10,000 limit applies for both single and married filers.
If you prepaid your 2018 state and local income taxes in 2017, you cannot deduct those taxes.
HOUSING MARKET IMPACT:
California's median home price is projected to increase 3.2 percent in 2018. Overall, home sales in California are expected
to grow in 2018.
Overall, the California housing market is expected to see a decline of 0.3 percent in active listings in 2018.
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1st-Time Buyers_Tax Reform
EXAMPLES of TAX CHANGES:
C.A.R. estimates 60 percent of First-Time Buyers will purchase a property priced below $500,000 (80% will purchase below $750,000).
Homes priced $500,000 and below will only be slightly impacted by tax reform.
Homeowners who itemize their tax returns can claim up to $10,000 total for state and local property taxes and income or
sales taxes. This $10,000 limit applies for both single and married filers and is not indexed for inflation.
The new limit on deductible mortgage debt is $750,000, down from $1 million. There are certain situations which may allow
a home purchase to qualify for the $1 million, even if the home closes after Jan. 1, 2018. Talk to a tax professional to learn
more.
Interest paid on home equity loans is only deductible if the proceeds are used to substantially improve the residence.
Disclaimer: This page is not intended to provide legal or tax advice. Application of provisions to particular tax situations
need to be discussed with an accountant, CPA, or tax attorney.
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