Curbed - Tax bill: Everything you need to know about the Tax Cuts and Jobs ActLove where you live2018-01-05T17:00:02-05:00http://archive.curbed.com/rss/stream/166200812018-01-05T17:00:02-05:002018-01-05T17:00:02-05:00Tax bill: California unveils plan to skirt Trump’s SALT deduction cap
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<p>Trump capped state tax deductions at $10,000, but the Golden State has a plan</p> <p id="0O63ya">California Senate leader Kevin de Leon unveiled legislation on Thursday that would help California get around the new cap on state and local (SALT) tax deductions, <a href="https://www.curbed.com/2017/12/29/16808148/tax-bill-housing-market-calculate-change">one of the more consequential measures for homeowners</a> in President Trump’s tax bill.</p>
<p id="JcRc0P"><a href="http://sd24.senate.ca.gov/news/2018-01-04-senate-leader-de-leon-introduces-legislation-protect-california-taxpayers">Under the plan,</a> Californians would make a “charitable donation” to the California Excellence Fund, which would give taxpayers dollar-for-dollar state tax credit. Taxpayers would use the credits to get out of paying SALT taxes, rendering the $10,000 cap on SALT deductions in the new tax law moot.</p>
<p id="KI8MFQ">“The Republican tax plan gives corporations and hedge fund managers a trillion-dollar tax cut and expects California taxpayers to foot the bill,” de Leon said in a statement. “We won’t allow California residents to be the casualty of this disastrous tax scheme.”</p>
<p id="b7e4gh">Prior to the new tax law, taxpayers could deduct any state and local property or income taxes from their federal tax returns. The new law puts a $10,000 cap on such deductions. For most states and taxpayers, this doesn’t matter—some states don’t have income taxes, for example.</p>
<p id="yzwOAe">But in cities with expensive housing markets in high-tax states, the cap could lead to huge tax bills. <a href="https://www.curbed.com/2017/12/6/16739576/tax-reform-salt-deduction-repeal">The markets most affected by the change</a> are coastal cities that tend to vote for Democrats, as lawmakers in those states have accused Republicans of weaponizing the tax code against Democrats.</p>
<p id="GOl3Z3"><a href="https://www.mercurynews.com/2018/01/04/californias-proposed-federal-tax-cap-work-around-unveiled/">According to <em>The Mercury News</em>,</a> UCLA law professor Kirk Stark is advising lawmakers on the matter and notes that California already offers a similar deal in which donors to conservation easements or private school vouchers receive a state tax credit and a federal tax deduction for the contribution.</p>
<p id="fMqNQS"><a href="https://taxfoundation.org/state-strategies-preserve-state-and-local-tax-deduction/">The Tax Foundation believes</a> that California’s plan “will face serious headwinds,” saying “the requirement that charitable contributions have a charitable aspect is a significant challenge for this approach,” in addition to listing a number of court cases with rulings that could kill the plan.</p>
<p id="CH3vjc">“[The IRS] outlines what qualifies as a deductible charitable contribution, specifically excluding contributions from which one benefits, to the extent of that benefit,” the Tax Foundation’s post reads. “For instance, if one purchases a $250 ticket to a benefit dinner, and the fair market value of the dinner is $50, then $200 can be deducted—not $250.”</p>
<p id="XaGtMm"><a href="https://www.curbed.com/2018/1/2/16841392/tax-bill-salt-deduction-cap">California isn’t the only state</a> looking for ways around the new cap. <a href="https://www.cnbc.com/2017/12/20/new-jersey-may-fight-gop-tax-plan-in-court-says-governor-elect.html">New Jersey Governor-elect Phil Murphy</a> said his state will explore all options to getting around the cap, including challenging the law on constitutional grounds. Pols from <a href="https://www.nytimes.com/2017/12/31/business/high-tax-states-law.html">New York</a> and <a href="http://www.courant.com/opinion/op-ed/hc-op-lesser-ct-must-blunt-tax-reform-harm-1231-20171229-story.html">Connecticut</a> have expressed similar comments.</p>
<p id="gxew0Y">Want to see if the new SALT cap affects you? Find your market in the interactive table below and click on your county. If the upper left corner “Homes with property taxes higher than $10,000” is a high percentage, you might be subject to higher tax bills.</p>
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https://archive.curbed.com/2018/1/5/16855682/california-trump-salt-deduction-capJeff Andrews2018-01-03T13:37:22-05:002018-01-03T13:37:22-05:00Tax bill: Some realtors see cooling off, not collapse, of high-end home market
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<figcaption>A waterfront estate sits on the shores of Indian Harbor in Greenwich, Connecticut, one of the wealthiest towns in the United States. | Shutterstock</figcaption>
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<p>Agents in California and northeast predict tax bill won’t stop steady sales of expensive residential real estate</p> <p id="fn6vSs">One morning soon after the tax reform package passed in Congress, Inger Stringfellow, an agent with William Pitt Sotheby’s International Real Estate in New Canaan, Connecticut, was already sorting through the impact. She arrived at the office with messages from a handful of past and present customers, anxious about the impact of the new tax bill. </p>
<p id="gm721T">“I don’t think any of us have a crystal ball,” she says. “I wish I had a definitive answer.”</p>
<p id="TCK8gz">Stringfellow, who specializes in high-end <a href="https://www.curbed.com/midcentury-modern">midcentury modern homes</a> in one of the wealthiest enclaves in the country, understands the anxiety and apprehension.</p>
<p id="V3Iqum">Changes in the<a href="https://www.curbed.com/2017/12/20/16797590/tax-bill-salt-real-estate-mortgage"> massive tax bill</a>, including capping the <a href="https://www.curbed.com/2017/12/6/16739576/tax-reform-salt-deduction-repeal">state and local tax deduction</a> and lowering the cap on the mortgage-interest deduction (MID), have caused many to worry about its <a href="https://www.curbed.com/2017/12/29/16808148/tax-bill-housing-market-calculate-change">big impact</a> on high-end real estate, especially in high-tax coastal and urban markets. According to <a href="https://go.redirectingat.com?id=66960X1516509&xs=1&url=http%3A%2F%2Frealtor.com%2F&referrer=archive.curbed.com&sref=https%3A%2F%2Farchive.curbed.com%2F2018%2F1%2F3%2F16845648%2Ftax-bill-housing-mortgage-sales-realtors" rel="sponsored nofollow noopener" target="_blank">Realtor.com</a> senior economist Joseph Kirchner, in the long term, the mortgage interest rate deduction (MID) limitation will affect only 1.3 percent of homeowners nationally, but those will be concentrated in large, high-cost metros.</p>
<p id="GhQj0t">The long lines around the country of homeowners waiting to <a href="https://www.curbed.com/2017/12/28/16827804/prepaying-2018-property-taxes-irs-tax-reform">prepay local property taxes</a> in an attempt to take advantage of sunsetting deductions highlight rising fear.</p>
<p id="OCKbLt">After prices have mostly recovered from the recession, are high-end markets in for a big price correction? </p>
<div><aside id="yMhAnv"><q>“There’s a big difference between cooling off and a collapse.”</q></aside></div>
<p id="hBrSfV">In interviews this week, Stringfellow and many of her colleagues in the high-end real estate marketplace don’t seem to be buying the worst-case scenarios. While the full impact of the bill—and its effect on home prices—is still coming into focus, many in the high-end real estate market feel that even with tax burdens rising and home values sure to drop, the market will see a dampening of energy and exuberance instead of the huge hit some have predicted. </p>
<p id="Vtuhrl">“Now the uncertainty is gone and the tax bill provisions directly affecting these homes if far less onerous than expected,” says Kirchner. “Over the next few months, we expect these buyers to come back into the market.” </p>
<p id="b49sAQ">Richard Haggerty, CEO of the Hudson Gateway Association of Realtors, which operates in regions of New York state like Westchester County and Manhattan, believes initial shock and awe—the National Association of Realtors had predicted at least a <a href="https://www.forbes.com/sites/kellyphillipserb/2017/12/01/realtors-predict-tax-bill-will-cause-housing-prices-to-drop-in-every-state/#6c9e4f2430fb">10 percent property devaluation</a> across the board—has given way, after changes to the final bill, to expectations of a mere “softening” of the market. And to him, that’s actually a great result.</p>
<p id="bIjxqM">“Irrational exuberance is my great fear, and we haven’t seen that since the early 2000s,” he says. “It’s just been slow and steady.”</p>
<aside id="O6rYxN"><div data-anthem-component="readmore" data-anthem-component-data="{"stories":[{"title":"Tax bill: Here’s how your county’s housing market will change","url":"https://www.curbed.com/2017/12/29/16808148/tax-bill-housing-market-calculate-change"},{"title":"Tax bill 101: What the new law means for homeowners","url":"https://www.curbed.com/2017/12/20/16797590/tax-bill-salt-real-estate-mortgage"},{"title":"Here's how the tax bill will impact housing","url":"https://www.curbed.com/2017/12/15/16778754/tax-bill-current-law-housing-measures"}]}"></div></aside><p id="pbcnEr">For Haggerty, who sells property in markets where a million-dollar listing isn’t really that expensive, dampening momentum may not be a terrible thing. His biggest issue is low inventory, an issue where he sees no end in sight. During the last half of 2016, he saw solid sales, though not exceptional.</p>
<p id="IaNfrV">Like others, he believes the truly high-end market won’t suffer. While the tax reform will add more to the housing costs and tax burdens of high-end owners, they’ll recoup plenty from cuts to their income taxes. </p>
<p id="jaZSWR">Christopher Dyson, an agent with The Agency in Los Angeles and a cofounder of the <a href="https://www.curbed.com/2017/11/30/16721712/pocket-listing-service-mls-real-estate-agent">Pocket Listing Service</a>, also believes the high-end market will stay relatively unaffected. Buyers and sellers working within the $3 to $8 million property range will feel the tax bill’s impact more, but the high end will “probably hold.” Like Haggerty, he’s preaching a slow-and-steady mantra.</p>
<p id="I39RW0">“I just had a client who bought a $2 million home and said that while the new tax burden isn’t ideal, he’ll figure it out,” says Dyson. “The demand to own a piece of Southern California is hopefully not going away.”</p>
<p id="X011rx">Back in the northeast, Jaime Sneddon, an Associate Broker for Sotheby’s International Realty in Connecticut, believes tax reform will help certain markets play the pricing game. He believes that he’ll be able to lure buyers considering New York and New Jersey to consider Fairfield County, Connecticut, since property taxes are nearly half as much in that state. Due to tax reform, he’s launching an aggressive campaign to target potential buyers leaving New York City.</p>
<p id="LNYni6">“I expect my business to soar over the next year because if you want to live near New York City, there are only three options, New York, New Jersey, and Connecticut,” he says. “The latter has now become the obvious choice.”</p>
<p id="X6DLDq">According to Trulia’s chief economist, Ralph McLaughlin, the bill’s real impact may be felt at a local government level. City and state officials are already looking at ways to <a href="https://www.curbed.com/2018/1/2/16841392/tax-bill-salt-deduction-cap">lower the tax burden for their constituents</a>. Certain specific groups of homeowners, like retirees on a fixed-income in high-tax areas, will really feel the hit when their bills skyrocket.</p>
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<p id="zqzlpW">“Some have said the sky will fall come tax season in 2018, but I don’t think there’s going to be any major impact on the market,” says McLaughlin. “There’s a big difference between cooling off and a collapse.”</p>
<p id="Ihn2HL">The bill’s net benefits to wealthy households is the key metric, McLaughlin says. Though the tax-related benefits of owning and buying property will decrease, the tax plan will leave more money in the pockets of those high-income households, who may not be any worse off than they were before. Some may even be better off.</p>
<p id="h3mkDF">The real demographic that’ll feel more pain are those requiring a mortgage of over $750,000 or more, since that’s the new cap for the mortgage-interest tax deduction. Using homes worth $833,000 or a more as a cutoff (based on a roughly 11 percent down payment, they’ll require mortgages of $750,000 or greater), McLaughlin examined current Trulia listings data and found the impact will be concentrated in markets in coastal California; Honolulu, Hawaii; Long Island, New York; and Bridgeport, Connecticut.</p>
<p id="ZCcMqO">Long-term, McLaughlin says, the bill’s true impact depends on how homeowners in these markets zero-out: If the overall tax benefit doesn’t outweigh the property tax hit, we may see homeowner action over the next few years, perhaps even referendums against property taxes. </p>
<p id="tpjtJU">“The second quarter is where you’ll really see the real impact,” says Haggerty. “My hope is that we’ll see some real stability.”</p>
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https://archive.curbed.com/2018/1/3/16845648/tax-bill-housing-mortgage-sales-realtorsPatrick Sisson2018-01-02T15:34:44-05:002018-01-02T15:34:44-05:00Tax bill: States look for ways around the new SALT deduction cap
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<p>Subtle adjustments to tax collection in blue states could help offset new changes </p> <p id="qhWig3"><a href="https://www.curbed.com/2017/12/29/16808148/tax-bill-housing-market-calculate-change">The new tax bill</a> President Trump signed into law last month hits high-tax, politically blue states like New York and California especially hard because of <a href="https://www.curbed.com/2017/12/6/16739576/tax-reform-salt-deduction-repeal">a new cap on state and local tax (SALT) deductions</a>. But the states hit hardest by the change are already <a href="https://www.nytimes.com/2017/12/31/business/high-tax-states-law.html">exploring ways around it.</a></p>
<p id="jSR8mr">The new law puts a $10,000 cap on SALT deductions. Previously, there was no cap on SALT deductions, which helped high-tax states raise revenue without taxpayers having parts of their income taxed twice, once at the state level and again at the federal level. The new cap means states might have to <a href="https://www.curbed.com/2017/12/5/16738728/tax-reform-city-government-budget-taxes">drop their tax rates or cut spending,</a> lest they face the wrath of angry constituents with suddenly enormous tax bills.</p>
<p id="3Sywlm"><a href="https://www.cnbc.com/2017/12/20/new-jersey-may-fight-gop-tax-plan-in-court-says-governor-elect.html">New Jersey Governor-elect Phil Murphy,</a> a Democrat, says his state will explore any and all options to make sure residents of New Jersey aren’t heavily impacted by the new legislation, and elected officials in other states have echoed those sentiments, including pols from <a href="https://www.nytimes.com/2017/12/31/business/high-tax-states-law.html">New York,</a> <a href="http://www.latimes.com/politics/essential/la-pol-ca-essential-politics-updates-california-senate-democrats-are-1513992780-htmlstory.html">California,</a> and <a href="http://www.courant.com/opinion/op-ed/hc-op-lesser-ct-must-blunt-tax-reform-harm-1231-20171229-story.html">Connecticut.</a> Murphy even suggested challenging the law in court on constitutional grounds because of the SALT deduction cap.</p>
<p id="mYiDwL"><a href="https://www.vox.com/policy-and-politics/2017/12/28/16818680/state-local-tax-deduction-income-payroll-trump-tax-reform-republican">The idea that appears to have the most traction,</a> pioneered by economist Dean Baker, is shifting state income taxes to payroll taxes. Currently, payroll taxes are levied on both employers and employees; Social Security and Medicare are funded by a 7.65 percent payroll tax on both the employee and employer side.</p>
<p id="lvrSuT">The idea to skirt the SALT deduction cap would essentially move state income taxes to an employer-side payroll tax. The part of an employee’s salary that’s taken by employer-side payroll taxes doesn’t count as taxable income, so that tax could still be collected by states but would be exempt from an employee’s individual federal taxation. Also, companies are still allowed to deduct payroll taxes, so the damage to business would be limited.</p>
<p id="g5QL2p">Proponents say that, in effect, this move would preserve the SALT deduction, as states could lower their income tax rates by the equivalent of a raise in the employer-side payroll tax rate, which is still deductible for companies, while lowering an employee’s taxable income. This idea would hinge on companies not responding by slashing wages to offset their tax hike, but given the tax bill as a whole is a gigantic windfall for corporations, employers might overlook a small setback. Companies also rarely slash nominal wages; instead they may just let inflation erode the value of employee salaries.</p>
<p id="qbg8VM">Another more radical idea circulating among lawmakers is to change income taxes to a <a href="http://www.washingtonexaminer.com/gop-limit-on-state-local-tax-deductions-could-be-circumvented-with-charities/article/2644096">“charitable donation to the state.”</a><strong> </strong>These “donations” would result in a state tax credit of equal value, limiting the amount of income subject to federal taxation by the same amount. It would also effectively preserve the SALT deductions.</p>
<p id="PmJ9Bb">Both of these ideas would face their own set of obstacles and complications, political and practical, as the changes would domino through the tax code. In hopes of avoiding those pitfalls, lawmakers from states that have yet to legalize marijuana, like New York, have floated the idea of legalizing and taxing marijuana, then lowering state and local taxes to help offset the change.</p>
<p id="DwF0fs">With so many options being kicked around, the path forward for these states on SALT deductions is unclear. But lawmakers are clearly motivated to mitigate the damage to their constituents.</p>
<p id="Faju22">Curious if your city is impacted by the SALT deduction cap? Find your county with the interactive table below. In the upper left corner is “homes with property taxes higher than $10,000.” If that percentage is high, you might be affected.</p>
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https://archive.curbed.com/2018/1/2/16841392/tax-bill-salt-deduction-capJeff Andrews2017-12-29T14:45:02-05:002017-12-29T14:45:02-05:00Tax bill: Here’s data on how your city’s housing market will change
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<p>If you live in a high-cost locale, brace for higher taxes</p> <p id="ixZuJ6">It may be a few years before experts can accurately assess how the new tax reform law will affect each city’s individual housing market, but one thing is clear: For the first time in a century, the federal government has backed away from subsidizing homeownership as a pathway to the “American Dream.”</p>
<p id="tkHPjd">The <a href="https://www.curbed.com/2017/12/20/16797590/tax-bill-salt-real-estate-mortgage">specific mechanisms</a> by which it’s doing this—lowering the cap on the mortgage-interest deduction (MID), capping state and local tax (SALT) deductions at $10,000, doubling the standard deduction—all interact with each other, sometimes canceling one of the others out, and will have different impacts depending on the housing market. </p>
<p id="TxfLIE">Here’s a good rule of thumb, though: If you live in a city (or for our purposes below, a county) with high housing costs, your market will likely get <em>more</em> expensive. If you live in a city with moderate to low housing costs, you may not notice any difference at all. Is there upside for homeowners in any market? It’s hard to find any.</p>
<h4 id="qtyrIK">Sales prices down, taxes up</h4>
<p id="9rOu1Z">“It’s very hard to come up with how this is helpful to housing,” said <a href="http://www.millersamuel.com/how-the-gop-tax-bill-might-impact-u-s-residential-real-estate/">Jonathan Miller, President and CEO of Miller Samuel Inc.,</a> a real estate appraisal and consulting firm “It’s either neutral or negative; there’s no positive, at least that we’re aware of at the moment. All this does is make everything more expensive, at least in high-cost housing markets.”</p>
<p id="cgk89G">As a result of the bill, Moody’s Analytics estimates that housing prices will drop about 4 percent nationwide relative to projections in which the law doesn’t exist, and those drops are more pronounced in high-cost housing markets. </p>
<p id="VovHue">A lower sale price is good news, though, right? Not necessarily. Average home prices will drop because of the lowered cap on the MID (from $1 million to $750,000), and a new cap on SALT deductions. These two tax deductions were baked into the price of homes-for-sale, so without them, prices will seem lower. But homeowners and buyers could end up with less mortgage interest to deduct, and a potentially astronomical property tax bill. Previously, there was no cap at all on property tax deductions.</p>
<h4 id="NLDX0f">How your specific housing market will change</h4>
<p id="EDdKoq">To see how these factors impact you, take a look at this interactive table that includes data from Zillow, Moody’s Analytics, and ATTOM Data Solutions. Click on your city name, and then the highlighted counties in your metro area, to surface data.</p>
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<p id="7Qvn3O"><small><em>Note: Data has been compiled by county, and we consulted with Curbed city editors to generate the list of counties that comprise their </em></small><a href="https://www.curbed.com/cities-directory"><small><em>14 metro areas</em></small></a><small><em>. Allow for some margin of error, particularly in counties where home prices vary drastically from county (rural) to city (urban).</em></small></p>
<h4 id="0ovHsT">What does this table even mean?</h4>
<p id="sB14ha">The “home price change” is a projection from Moody’s Analytics that compares home prices under the new law with home prices had the law not passed. You can see they’re all going down. (Ergo, the bigger the price drop, the more the tax bill affects that county.) Remember, you’re losing the MID and SALT deductions outlined above. The more these deductions mean to your city, the more the projected price will drop.</p>
<p id="gZ6JV3">The percentage of homes with property taxes over $10,000, which is the new SALT cap, is data provided by ATTOM Data Solution. The higher the percentage, the more your city will be impacted by the cap on SALT deductions. The percentage of homes valued higher than $750,000, which is the new MID cap, is also from ATTOM Data Solutions, and that data is from homes sold in 2017. The higher the percentage, the more the MID cap impacts your city. </p>
<p id="idJer7">The number of homes worth itemizing for is from a Zillow study. The higher the percentage, the less likely it is that the doubling of the standard deduction affects you. In lower-cost housing markets, the standard deduction doubling—to $12,000 for individuals, $18,000 for heads of household, and $24,000 for couples—will negate the caps on the MID and SALT deductions. (Homeowners in lower-cost markets may skip itemizing their taxes because sale prices and property taxes aren’t high enough for deduction changes to affect much.)</p>
<h4 id="pv0bum">What effect will this have on my house, specifically?</h4>
<p id="xXlyDh">As you can see in the table, the SALT deduction has a greater impact on a given market’s drop in home prices—that’s because there’s a cap on how much MID can affect a single homeowner. SALT didn’t have any cap at all before the new law, so what this ends up costing you is proportional to your city’s property tax rate—a potential nightmare for homeowners in places like New York City.</p>
<p id="W4nKhH">Some other things to consider: The new MID cap does not affect homes purchased before Dec. 15, 2017; those homebuyers will still be able to deduct interest on up to $1 million worth of mortgage debt on their primary residence. The SALT deduction cap begins immediately.</p>
<p id="xAyRw9">For those with mortgage interest deductions on home equity loans, you’re out of luck. The new law says you can’t deduct any of this interest at all, and that change takes effect immediately. </p>
<p id="Ad16ph">If you’re looking to buy a home right now, it may be more difficult if inventory drops as homeowners become more reluctant to sell. (Some won’t want the risk of a new mortgage; others may wait to see how the market shakes out after the new law takes effect.)</p>
<p id="ZCWCqC">Conversely, if you’re looking to sell, it might be wise to see where the market equalizes before jumping into a new mortgage. Additionally, interest rates will likely go up as the government takes on more debt (though Jonathan Miller believes it will be modest at best).</p>
<p id="3vi9qZ">If you’re a renter, it’s hard to say if the law impacts you at all. Some believe it will put downward pressure on rent, since tax incentives for developers are still in place; you might also see more development and a higher supply—though it would take years to bear out.</p>
<h4 id="DIvo0N">How do individual tax cuts factor in? </h4>
<p id="FjbAjL">If you live in a city where owning a home means your tax bill is going up, some of that could be offset by a drop in individual tax rates and thresholds. These cuts are across all income levels, but will impact individual brackets differently—and are set to expire in 2025. The table below shows how taxes for your income bracket will change:</p>
<div id="B1zAoT"><iframe width="933" height="700" src="https://app.powerbi.com/view?r=eyJrIjoiMmFiMzQ3YzUtMGM2Ni00ZDZiLWJmY2ItNTU5N2NjYzAwYzNmIiwidCI6IjU5NTc3ZjhkLTQ1NTctNDg5YS04N2RhLWE2ZGFjZWUwM2UwZCIsImMiOjF9" frameborder="0" allowfullscreen="true"></iframe></div>
<p id="HRDCSK"><em>Correction: A previous version of this story stated that the tax bill repealed mortgage-interest deductions on second homes. While that was in a previous version of the bill, it did not make it into the final bill.</em></p>
https://archive.curbed.com/2017/12/29/16808148/tax-bill-housing-market-calculate-changeJeff Andrews2017-12-28T16:47:59-05:002017-12-28T16:47:59-05:00Prepaying 2018 property taxes: Is it worth it?
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<figcaption>Shutterstock</figcaption>
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<p>Cutting through some of the confusion over the impact of tax reform. </p> <p id="A3j8aV">The <a href="https://www.vox.com/policy-and-politics/2017/12/14/16773202/republican-tax-bill-reform-cuts-conference-committee-senate-house">tax reform package</a> just signed into law aims to spur economic and job growth. During the waning hours of 2017, it looks like it might be doing just that, at least as far as tax accountants are concerned. </p>
<p id="IkKSoi">Due to changes in tax rates and deductions—<a href="https://www.curbed.com/2017/12/20/16797590/tax-bill-salt-real-estate-mortgage">all broken down in this helpful Curbed explainer</a>—many Americans are rushing to file early and prepay property taxes for 2018, in the hopes of taking advantage of expiring deductions and changing tax rules before the new law goes into effect on January 1. In Fairfax, Virginia, hundreds of residents lined up one morning earlier this week to prepay, and New York Governor Andrew Cuomo <a href="https://www.nytimes.com/2017/12/27/business/prepaying-your-property-taxes-irs-cautions-it-might-not-pay-off.html">signed an executive order</a> to help residents prepay.</p>
<p id="OWm4uK">The mad rush keeping accountants busy stems from back-and-forth between local jurisdictions and the IRS. Early this week, many local governments, especially in <a href="https://www.curbed.com/2017/12/6/16739576/tax-reform-salt-deduction-repeal">expensive, high-tax coastal markets</a> such as New York, New Jersey, and Washington, D.C., told residents they could make and possibly deduct from prepayments. </p>
<p id="rSR8C2">But, just as soon as taxpayers began scrambling to file early, <a href="https://www.irs.gov/newsroom/irs-advisory-prepaid-real-property-taxes-may-be-deductible-in-2017-if-assessed-and-paid-in-2017">on Wednesday</a>, the IRS said taxpayers could only claim deductions on taxes assessed during the 2017 calendar year. </p>
<p id="NjMwHC">That’s created uncertainty, with some local governments explaining to residents who already rushed to file early that prepayments likely won’t qualify for federal tax deductions. To get a sense of the confusion, check out the <em>Washington Post’s</em> list on responses from local officials in <a href="https://www.washingtonpost.com/local/so-you-prepaid-your-property-taxes-will-you-get-the-deduction-and-if-not-can-you-get-your-money-back/2017/12/28/a14dde5e-ebdb-11e7-8a6a-80acf0774e64_story.html?utm_term=.f5670a799452">D.C. and surrounding areas of Virginia</a>.</p>
<p id="LYibel">Here are some other suggested guidance from personal finance experts about the situation (of course, any and all tax questions should be answered by a professional).</p>
<ul>
<li id="mj1XJq">If property tax <a href="https://www.cnbc.com/2017/12/28/how-to-pre-pay-2018-property-taxes.html">has been assessed</a> but is not due until 2018, you can deduct the amount for this year as long as it's paid by Dec. 31. <a href="https://www.forbes.com/sites/kateashford/2017/12/28/property-taxes/#39069b3f5513">Without a bill for 2018,</a> it’s not officially deductible. </li>
<li id="ajA8Rs">Ask yourself, based on your <a href="https://www.cbsnews.com/news/prepaying-property-tax-irs-will-you-benefit/">particular tax situation</a>, if you will you itemize next year, or claim the nearly doubled standard deduction, since the answer will determine the impact of prepaying. </li>
<li id="PV4e37">Check with your local authorities: <a href="https://www.wsj.com/articles/looking-to-prepay-property-taxes-check-local-timetables-first-1514479088">widely varying timetables</a> for assessments and tax due dates have created confusion across the country.</li>
<li id="H0maHM">Those subject to the <a href="https://www.cnbc.com/2017/12/28/how-to-pre-pay-2018-property-taxes.html">alternative minimum tax </a>likely will not find prepaying beneficial.</li>
</ul>
https://archive.curbed.com/2017/12/28/16827804/prepaying-2018-property-taxes-irs-tax-reformPatrick Sisson2017-12-20T14:15:02-05:002017-12-20T14:15:02-05:00Tax bill 101: What the new law means for homeowners
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<p>Everything you need to know</p> <p id="gasgg7">Republicans say the Tax Cuts and Jobs Act is a massive tax cut that will spur investment, jobs, and economic growth. But Democrats counter that the bill <a href="https://www.vox.com/policy-and-politics/2017/12/19/16786006/looting-of-america">is a brazen effort to loot the American government,</a> with an eye toward unraveling social safety programs like Medicare, Medicaid, and Social Security.</p>
<p id="Dz5V0Q">But having passed the House and Senate, the bill is now a President Trump signature away from becoming the law of the land, so what does it mean for you, the taxpayer?</p>
<p id="qKHMI8">In the past, tax reform efforts have tried to simplify the tax code and remove special-interest deductions that have become entrenched since the United States ratified the income tax in 1913. The Tax Cuts and Jobs Act makes no attempt to simplify the code; if anything, it does the opposite, introducing new loopholes while making only a minor effort to reel in special interests.</p>
<p id="WnQbU1">The bill’s primary function is a massive corporate tax cut, dropping the rate from 35 percent to 21 percent. Individuals will get an across-the-board cut as well, albeit small, but in an attempt to offset some of the $1.5 trillion cost, the individual cuts expire after 2025.</p>
<p id="djM4QH">How does this impact you? We’ll walk you through the basics:</p>
<h3 id="qMncEU">Individual rates fall, standard deduction doubles</h3>
<p id="7WsmKq">The good news is that in 2018, you’re probably getting a tax cut. The individual rates fall across the board. The new law not only lowers rates across all seven tax brackets, but lowers the threshold for each bracket. This applies to taxpayers who file jointly as well.</p>
<p id="Y43PLL">The new law also doubles the standard deduction to $12,000 for individuals and $24,000 for joint filers. For taxpayers with few itemized deductions, this means taking the standard deduction will exempt twice as much of your income from federal taxation. For those who currently itemize, it may now make sense to simply take the standard deduction, and thus have less income subject to federal taxation as well.</p>
<p id="LJ2EIT">Below, you can adjust the slider at the bottom to match your income to see how the law changes for you. If you file jointly, click the right arrow at the bottom of the visual to see how your circumstances change.</p>
<div id="8yLGNn"><iframe width="933" height="700" src="https://app.powerbi.com/view?r=eyJrIjoiMmFiMzQ3YzUtMGM2Ni00ZDZiLWJmY2ItNTU5N2NjYzAwYzNmIiwidCI6IjU5NTc3ZjhkLTQ1NTctNDg5YS04N2RhLWE2ZGFjZWUwM2UwZCIsImMiOjF9" frameborder="0" allowfullscreen="true"></iframe></div>
<h3 id="TqkbQf">But the benefits to the poor and middle class are temporary</h3>
<p id="jAcEPc">While the corporate tax cut is permanent, the majority of the individual cuts expire on December 31, 2025, setting up yet another potential “fiscal cliff.” Republicans have said they intend and expect to extend these tax breaks when the time comes.</p>
<p id="HNfJzf">But under the law as it stands, they expire, and that’s led a number of nonpartisan analyses to conclude that while the poor and middle class get a tax cut in the short-term, <a href="https://www.curbed.com/2017/12/7/16747632/president-trump-tax-reform-real-estate-development">most of the long-term benefit is to the rich.</a></p>
<p id="rN6jyi">While supporters of the bill say the corporate tax cut will lead to more investment, more jobs, and higher wages, there will undoubtedly be a windfall to corporate shareholders as companies kick their tax cuts back to investors in the form of dividends. <a href="https://www.bloomberg.com/news/articles/2017-12-19/trump-asks-how-s-your-401-k-but-most-voters-don-t-have-one">But as only 45 percent of Americans own stock,</a> and only 14 percent own stocks outside of a 401(k), this benefits mostly the rich.</p>
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<h3 id="lj2Wvk">State and local tax deductions are capped at $10,000</h3>
<p id="mIKnru">Currently, taxpayers can deduct what they pay in state and local property, income, and sales taxes from their federal returns. The new law caps these deductions—which can be any combination of property, income, and sales taxes—at $10,000.</p>
<p id="IAlomF"><a href="https://www.curbed.com/2017/12/6/16739576/tax-reform-salt-deduction-repeal">If you live in a coastal city with high local and state taxes</a>—and particularly if you own a home on which you pay property taxes—this could have a huge impact on your final tax bill, even with the lower rates and doubled standard deduction.</p>
<p id="NzDv8k">Of course, high-tax states and cities tend to be on the coasts—and tend to vote Democratic. Republicans <a href="https://www.vox.com/2017/12/20/16790040/gop-tax-bill-winners">have been accused of attacking blue states</a> with this measure, and the 12 Republicans who voted against the bill in the House largely did so on the basis of the cap on SALT deductions.</p>
<p id="TCaq66">Below, you can see how often SALT deductions are claimed in your area to see if this will impact you. If you’re using Google Amp, you may have to open the full page to see it.</p>
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<h3 id="vLRQJM">The cap on mortgage-interest deduction drops to $750,000</h3>
<p id="lmaQ91">The real estate lobby is one of the most powerful and active on matters related to the tax code, and the mortgage-interest deduction has long been considered a sacrosanct pathway to the American dream of owning a home. That’s why even though the cap is higher than the $500,000 the House proposed, it’s surprising that it was changed at all.</p>
<p id="dQZl26">Because most people’s home values don’t exceed $750,000, this is another measure that affects <a href="https://www.curbed.com/2017/11/3/16600084/tax-reform-mortgage-interest-deduction">mostly coastal blue-state cities with expensive housing markets</a>, and it only applies to new mortgages. The National Low Income Housing Coalition estimates that just 1.9 percent of mortgage originations from 2013 to 2015 exceeded $750,000 in value; California accounted for 45.7 percent of them, and New York accounted for 7.4 percent.</p>
<p id="kGCBJN">The new cap won’t apply to existing mortgages, just new ones. And because of the doubled standard deduction, this may not affect you if you forgo itemizing. A Zillow study estimated that roughly 44 percent of U.S. homes are worth enough for it to make sense for a homeowner to itemize and take the MID under current law. Taking into account the new standard deduction, SALT changes, and MID cap into account, that number drops to 14.4 percent under the new law.</p>
<p id="RWdo7p">That’s bad news for the real estate lobby and wealthy property owners, as <a href="https://www.curbed.com/2017/12/18/16791532/tax-bill-home-prices-drop">Moody’s Analytics estimates</a> that home prices will drop 4 percent nationwide compared to projections without the new tax law.</p>
https://archive.curbed.com/2017/12/20/16797590/tax-bill-salt-real-estate-mortgageJeff Andrews2017-12-20T10:37:35-05:002017-12-20T10:37:35-05:00Tax bill: How President Trump’s real estate investments may benefit
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<figcaption>Trump Tower in Chicago | Shutterstock</figcaption>
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<p>A certain family business stands to gain from provisions of the tax reform package</p> <p id="E6Jw4Z"><em><strong>Update: This story was updated on Dec. 20 to reflect changes in the tax reform bill</strong></em></p>
<p id="B2kKYv">President Trump has been bullish on the many different ways tax reform will supercharge the economy, make U.S. companies more competitive, and continue the stock market’s record rise. He’s also said, <a href="https://www.theatlantic.com/business/archive/2017/09/trump-tax-plan-benefit-rich/541584/">multiple</a> <a href="http://www.politifact.com/truth-o-meter/statements/2017/sep/28/donald-trump/donald-trumps-dubious-claim-his-tax-plan-wont-bene/">times</a>, that the legislation, on the verge of being passed by the House and Senate, won’t offer any advantages to himself.</p>
<p id="j2BgFo">During <a href="https://www.nytimes.com/2017/11/29/us/politics/a-main-street-tax-speech-becomes-a-trump-riff-on-the-rich.html">a speech</a> in St. Charles, Missouri, in late November, the President said both his wealthy friends and his accountants were “going crazy” due to tax reform, and that they’d lose out due to changes in rates and deductions. “The rich people actually don’t like me,” he said. </p>
<div id="m5GNRL">
<blockquote class="twitter-tweet">
<p lang="en" dir="ltr">President Trump on tax reform: "My plan is for the working people, and my plan is for jobs. I don't benefit" <a href="https://t.co/fEW6Y8FRft">https://t.co/fEW6Y8FRft</a></p>— NBC Politics (@NBCPolitics) <a href="https://twitter.com/NBCPolitics/status/913092714366828576?ref_src=twsrc%5Etfw">September 27, 2017</a>
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<p id="D5akCA">Now that the bill is on the brink of passage, and analysts can glean a somewhat better sense of how the Tax Cuts and Jobs Act will ultimately impact tax breaks, rate reductions, and deductions, it’s clear President Trump may not have as much to worry about as he previously suggested.</p>
<p id="3lI1u8">The final package suggest President Trump and other wealthy real estate developers (as well as their accountants) will likely <a href="http://www.politifact.com/truth-o-meter/statements/2017/sep/28/donald-trump/donald-trumps-dubious-claim-his-tax-plan-wont-bene/">be quite happy</a>. Here are the different ways tax reform benefits real estate moguls and big developers.</p>
<h3 id="byoMx1">Lowering taxes on pass-through businesses</h3>
<p id="n68PeA">Pass-through businesses—partnerships, S-corporations, and limited liability companies (LLCs)—are corporate entities that allow business income to “pass-through” to the owner, thereby paying a personal income rate, as opposed to a business rate. </p>
<p id="JllUpS">The <a href="http://fortune.com/2017/09/26/donald-trump-gop-tax-reform-plan/">Trump Organization</a>, which owns more than 500 such entities, would see their annual tax bills drop, due to a rate cut from near 40 percent to 25 percent. Many of the most lucrative parts of the Trump Organization’s real estate empire—rental income, royalty payments, and licensing fees—<a href="https://www.nytimes.com/2017/11/30/business/trump-benefit-tax-cuts.html?_r=0">are organized as pass-through businesses</a>. </p>
<p id="7f3mit">In addition a last-minute change added during the reconciliation process, the so-called “Corker Kickback, would only amplify these benefits, offers a 20 percent deduction for so-called "pass-through" entities, such as LLCs, LPs, and S-Corporations.</p>
<h3 id="UudGco">Property development deductions and commercial real estate breaks</h3>
<p id="QYu6Dm">The final bill also contains a number of deductions and breaks that would particularly help real estate developers. According to a <a href="https://www.washingtonpost.com/business/economy/the-many-ways-president-trump-would-benefit-from-the-gops-tax-plan/2017/11/10/d82c8116-c4ba-11e7-aae0-cb18a8c29c65_story.html?utm_term=.7122dc97fa75"><em>Washington Post</em></a><em> </em>analysis, tax reform would allow developers to deduct interest expenses for a variety of real estate activities, including construction, management, and property development. </p>
<p id="AFM9GV">Another provision would maintain the “<a href="https://www.bisnow.com/national/news/commercial-real-estate/how-the-new-tax-laws-could-affect-the-commercial-real-estate-sector-82675">like-kind exchange</a>,” an exemption that lets a business avoid taxes if it reinvests profits in another business, except in the case of commercial real estate development. A <a href="https://www.nytimes.com/2017/11/30/business/trump-benefit-tax-cuts.html?_r=0"><em>New York Times </em>analysis</a> suggested this switch would allow owners of commercial real estate to “keep flipping the properties until they die without ever paying any capital gains tax.”</p>
<h3 id="G4OfUc">Eliminating the Alternative Minimum Tax (AMT)</h3>
<p id="Og2MhQ">This mechanism put a minimum on how much wealthy individuals would pay, in effect limiting the number of deductions that could be claimed by taxpayers. According to an analysis by <a href="http://time.com/4960872/donald-trump-taxes-net-worth/"><em>Time</em> </a>of the leaked 2005 Trump tax return, the AMT increased his final tax bill by $31.2 million that year. </p>
<p id="WZgbSm">In addition, the doubling exemptions to the estate tax will give wealthy families the ability to pass along more assets and wealth to children, a huge tax savings for someone with extensive wealth who may want to pass the family business to his or her heirs. <a href="https://www.bloomberg.com/news/articles/2016-12-09/estate-tax-repeal-under-trump-would-benefit-president-cabinet">Bloomberg estimated</a> that a full repeal would save Trump more than half a billion dollars, based on an estimated net worth of $3 billion, so he’ll still save substantially with the current bill.</p>
<h2 id="7ApR6j">Preservation of the <a href="https://www.curbed.com/2017/11/2/16599416/tax-reform-historic-tax-credit-historic-preservation">Historic Tax Credit</a>
</h2>
<p id="ld5OaZ">Much-loved by preservationists, these credits help restore and renovate historic structures and have been a boon for urban development. The Trump Organization is currently seeking those credits to offset $40 million in costs for the transformation of Washington, D.C.’s post office into a <a href="https://dc.curbed.com/venue/25098/trump-international-hotel-washington-dc">Trump Hotel</a>. </p>
<p id="fbiR0I"></p>
https://archive.curbed.com/2017/12/7/16747632/tax-bill-president-trump-real-estate-developmentPatrick Sisson2017-12-18T17:34:57-05:002017-12-18T17:34:57-05:00Home prices will drop as a result of tax reform, says report
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<p>Three key changes have caused Moody’s to lower home price projections</p> <p id="iJLDz7">Congressional Republicans reached a deal late Friday on a reconciled version of the House and Senate tax bills, and while experts are still sifting through the fine print to determine its potential impact, one thing seems clear: Home prices will take a hit.</p>
<p id="ZFdNXU">This could be good news or bad news depending on whether you already own a house or are a prospective buyer, but a Moody’s Analytics report released Monday estimates that by the summer of 2019 home prices will be down nationally by 4 percent compared to where they’d be if no tax bill was passed. </p>
<p id="ptCfP1">To be clear: This doesn’t mean home prices will fall by 4 percent from where they are right now, but Moody’s estimates they’ll be 4 percent less in the future than they would be if current conditions held.</p>
<p id="8mHluD">The drops are projected to hit hardest in markets where home prices are already high. East Coast cities like New York, Philadelphia, and Washington D.C. show heavy drops, as do West Coast cities, including San Francisco and Los Angeles. South Florida and a few cities in the Midwest also stand to see substantial drops.</p>
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<p id="e3MT8a">The home-price drops are mostly the result of three key provision changes in the tax bill, which could be signed by President Trump as early as this week: the lowered cap on mortgage-interest deductions (MID), from $1 million to $750,000; the cap on state and local tax (SALT) deductions of $10,000; and the doubling of the standard deduction.</p>
<p id="CqEms1">Currently, homeowners can deduct interest they pay on their homes and second homes on loans up to $1 million in value. While lowering the cap to $750,000 is a fairly modest measure—the House bill lowered it to $500,000, and the deduction’s many critics would like it repealed outright—it means wealthy homeowners in hot real estate markets are exposed to higher tax bills.</p>
<p id="kDTrSM">The same goes for SALT deductions. Currently, taxpayers can deduct what they pay in state and local property and income taxes from their federal returns. Under the new law, taxpayers can only claim a maximum of $10,000, although it can be any combination of income or property taxes. This hits high tax states like New York and New Jersey particularly hard.</p>
<p id="63oCoz">Because the MID and SALT deductions are baked into the price of homes, eliminating or capping the deductions will inherently lower the value of homes that are particularly exposed to the MID cap or are in high tax areas.</p>
<p id="9Njbus">The new standard deduction complicates things further. When taxpayers file federal returns, they have a choice between itemizing their deductions or taking the standard deduction. The new law will double the standard deduction from $6,350 to $12,000 for individuals and from $12,700 to $24,000 couples. </p>
<p id="Cbmi30">It doesn’t make sense for taxpayers to itemize unless their deductions are greater than the standard deduction, and with the standard deduction doubling, fewer taxpayers will itemize. This will lead to fewer people taking the MID and SALT deductions, further weakening their value and thus home prices.</p>
<p id="nxNILs"><a href="https://www.zillow.com/research/mortgage-interest-deduction-750k-17620/">A recent Zillow report</a> showed that under current law, roughly 44 percent of homes were worth enough to justify itemizing and taking the MID. Under the new law, only 14.4 percent are worth it.</p>
<p id="YoMM9M">So if you’re looking to buy in an expensive market, the bill might help you achieve the American Dream. If you already own, the value of your house might drop and you’re likely stuck with a higher tax bill.</p>
<p id="BHcmD1"></p>
https://archive.curbed.com/2017/12/18/16791532/tax-bill-home-prices-dropJeff Andrews