Will The Tax Cuts and Jobs Act keep more San Fernando Valley buyers on the fence? C.P.A. Issam Aljaber is here to discuss this and other concerns about tax reform.
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Today I’m joined by C.P.A. Issam Aljaber to discuss some of the concerns we’re hearing from home sellers about the new tax reform act.
Do buyers really want to buy a home right now after the tax reform act?
Issam believes that buyers will still want to buy a home regardless. Although there may not be as much of a tax incentive to buy a home, homeownership is still exciting. We haven’t seen any less buyer demand in our market. The tax deduction was more of an incentive rather than a dealbreaker for people planning on buying a house.
That said, there are a few points in the tax reform act that buyers and sellers in California should know about.
One of them is the mortgage interest deduction. Under the previous tax law, up to $1 million of mortgage interest was deductible for the personal income tax. The new limit is $750,000.
If you are buying in the $1 million range and putting 20% down, Issam believes you are still safe in that range and able to deduct mortgage interest. Once you are over that price point, a lot of the homes sold in that price point are often cash transactions anyway.
Although there is less of a tax incentive to buy, people still want to become homeowners.
Price points under $900,000 are not affected that much by this change. People used to feel more of a tax savings when they bought a $200,000 or $400,000, so there is not much of an incentive there anymore. Like we mentioned earlier, though, tax incentives are not necessarily make-or-break for those planning to buy a home.
Finally, sellers have also been asking if the capital gains exemption was affected by the tax reform.
Although there were talks in earlier versions of the bill about changing the capital gains tax exemption, no changes were made in the final bill. If you are thinking of selling your house, single taxpayers can still get up to $250,000 in capital gains tax-free, and married couples can still get up to $500,000 in capital gains tax-free.
If you have any other questions about the tax reform act, you can contact Issam Aljaber at (818) 383-8029. As always, if you have any real estate questions, just give me a call or send me an email. We would be happy to help you!
