How Has the Tax Reform Affected the Real Estate Market?
How Has the Tax Reform Affected the Real Estate Market?
One of the doom and gloom theories regarding the federal tax reform, also known as the Tax Cut and Jobs Act, was that it would put a heavy burden on the real estate market. The theory was that because the reform placed a $10,000 cap on the federal deduction for state and local taxes(SALT)it would severally hurt the real estate market, especially in very expensive locations.
The reasoning was that in these more expensive cities, like San Francisco and New York, local property taxes can cost more than $10,000 by themselves. It wasn’t just the real estate industry that was crying foul, either. Many financial experts warned that this change would lower the value of homes and hurt local governments’ revenue from property taxes.
Forecasters Missed Their Mark
So how have those predictions turned out so far? As it turns out, those cries of doom and despair have been mostly incorrect. In fact, the reality is the real estate market nationwide was already showing signs of decline before the Tax Cut and Jobs Act. That makes it harder to pinpoint precisely what activity the tax change is driving. However, that being said, the new limit on the state and local tax (SALT) deduction has not caused a total real estate meltdown across the country, including in high-tax markets.
For example, even one of the most expensive real estate markets in the country, the Bay Area, has not seen any adverse effects. San Francisco, Silicon Valley and Oakland remain some of the most competitive markets in the entire country. In fact, these three markets have all enjoyed double-digit growth in sale prices in the last year.
Some Locations Seeing a Slowdown
While the results have been much better than expected in most locations, there are some markets that have seen a slowdown. For example, some residents of New Jersey have moved in order to reduce their tax bill because they can no longer deduct more than $10,000. Other markets, like Fairfield County, Connecticut have seen a big spike in the number of homes being put up for sale. And in Florida, many people who own a second home, have decided to switch their permanent residency to the Sunshine state in order to lower their tax bill.
Luxury Market Taking a Hit
One area that has perhaps taken the biggest hit is the luxury real estate market in high-tax states. For example, sales of homes worth more than $1 million in the Queens and Brooklyn areas have slowed down. On the other hand, the opposite is true for high-end homes in low tax states, such as Florida and Nevada. These have experienced the highest growth percentage in the country for luxury home sales.
What’s in Store Long-Term?
The other side of the story is how the SALT-cap deduction will affect local governments. Many financial experts still think local agencies will see an adverse effect because of this change. That’s because the $10,000 cap could make it harder for lawmakers to increase property tax rates in those areas if residents can’t write off the increased hike.
We hope you found this article about “How Has the Tax Reform Affected the Real Estate Market?” helpful. If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page or website www.GROCO.com.
To receive our free newsletter, contact us here.
Subscribe our YouTube Channel for more updates.
Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com. GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.
Alan L. Olsen, CPA, Wikipedia Bio
GROCO.com is a proud sponsor of The American Dreams Show.
The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.
Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.
The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.
They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..
American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:
Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…
MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness. It’s mission statement:
In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.
Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.
Congress Not Looking to Pass Internet Sales Tax Anytime Soon
Ever since the Internet became a worldwide sensation, there have been those who think it should be taxed, especially Internet sales from state to state. Taxing the Internet would be a huge source of extra revenue for the government, but for those who use the Internet to shop (which is just about everyone these days),…
NBA Stars Losing Hefty Amounts of Their Salary to the Taxman
Just about everyone knows that professional athletes make a ton of money. Whether you agree with athlete salaries or not, the fact is those hefty numbers you always see reported when an athlete signs a new deal aren’t really all that they’re cut out to be. Oh sure, they are making a lot of money,…
Successful Investing With Taxes in Mind
There are many ways to earn money, but no matter how you get your income the IRS wants its piece of the pie. That includes any gains you make from your investments when you sell them. Although everyone does have to pay tax on their gains, you shouldn’t give the IRS any more than what…
IRS Is Carefully Watching Bitcoin and Other Cyber Currency
Big Brother is watching. Always watching. In this case, Big Brother is the IRS and you might be surprised what they’re looking into now. Although, when it comes to the IRS, nothing should surprise us. Have you ever heard of Bitcoin? It’s one of a handful of virtual currencies that making buying and selling things…