With a limit of 10k of real estate tax deductibility, will this hurt the value of high end homes and also the purchase of vacation homes given the 10 k. Limit
It’s state income and property tax up to $10k, so it’s worse than you state and yes, I think it will.
I think it will have some impact in California, NY and similar. The impact might be seen in emmigration or lower sales of move-up housing.
The problem in states like California is that you can't move in-state without triggering a new property tax burden. It's great to see price appreciation on your home, but you almost have to leave the state to unlock it. My SALT expense exceeds the cap and I live in a very modest home. If I were to sell, my next California home would need to be 30% below my sales price to keep my taxes at the same level, basically a lower standard of living.
The other problem with the implementation of the cap is that two-income married couples are capped at the same level as single filers. Does that make sense?
The answer is no. Will it have ANY impact? Possibly on mid priced homes in high value areas, i.e. $750k - $1.5M. I live in an area where the median home price is approaching $500k, and it is not a "high tax blue state".
But overall, I don't think there will be a lot of tanking.
At the margin, more expensive homes become less attractive. But remember a maximum $750,000 mortgage interest deduction remains (Down from $1 million). So there’s still an incentive tax wise. But with state/local/property capped at $10,000..I would think expensive homes likely just became maybe 10% less valuable.
Offsetting this is the housing shortage in every price range..providing price support.
I see different opinions posted about the subject. My own is that it will not affect home buying much, if any. RIch folks who buy these gazillion dollar places don't do so because they can write off mortgage interest and property tax. That's not the motive. Ordinary folks who live in most places in America have absolutely nothing to gain or lose in the new tax law. My sister lives in LA and just bought a condo for $1MM. She has mortgage interest of about $40,000. per year and property tax of $20,000. So she loses a deduction of $50,000. Which if she's in the highest income tax bracket, she "loses" about $20,000. in tax she has to pay now, vs tax she would not have to pay under the old law. So I can see what they mean about high tax and high housing cost areas. But you can choose to live elsewhere and some of that may happen.
Looking at your home as an ”investment” is probably the wrong view. It should be viewed as shelter. What you put into it is consumption make it more livable.
"Many pay high property taxes due to where they live, not because they have high end homes..."
That is exactly right. My property taxes include bond repayment and general fund assessments for schools, parks, community colleges, libraries, water projects and in 2018 roads will be added.
If you value these amenities and want to stay near your community, then the only escape from higher taxation would be to buy a lower priced home when you sell. Those who have lived in their homes the longest will see the greatest impact. Increasing the SALT deduction would provide some offset for those who still itemize.
I think there will be trickle down over time that will be seen in ways other than an outright collapse of high-end homes
That is exactly right. My property taxes include bond repayment and general fund assessments for schools, parks, community colleges, libraries, water projects and in 2018 roads will be added.
If you value these amenities and want to stay near your community, then the only escape from higher taxation would be to buy a lower priced home when you sell. Those who have lived in their homes the longest will see the greatest impact. Increasing the SALT deduction would provide some offset for those who still itemize.
I think there will be trickle down over time that will be seen in ways other than an outright collapse of high-end homes