Before the finger pointing and war of words about the Tax Bill’s impact on real estate take a look at the graph above. Homeownership in Ohio is at a historic low- a decline which began after the housing boom then bust.
The younger generations don’t share their parents’ values about owning a home. Many have jobs that require moving to new locations for work and the knowledge that companies no longer routinely buy homes so employees can move on.
In addition to generational shifts affecting real estate, the new tax law rules have some important changes for homeowners. Mortgage interest will still be tax deductible but only on mortgages up to $750,000. This change might affect prices in some areas in and around greater Cincinnati. Even more challenging for some areas is the fact that property and state taxes will be deductible but only up to $10,000 dollars. Current homeowners living in areas with high property taxes may find a few fewer buyers qualifying for a loan with the new deduction cap.
As advertised, the standard deductions have been raised which may cause fewer people to itemize and get the deductions. It’s now possible for taxpayers to pay less in taxes by taking standard deductions instead of itemizing on more complicated tax forms. (are any of the forms really simple?)
The standard deduction for 2018 has almost doubled from 2017 to $12,200 for single filers and $24,400 for joint filers.
Further good news the deduction for capital gains on the sale of a primary residence wasn’t changed. Taxpayers will still be able to exclude up to $500,000 (or $250,000 for single filers) from capital gains when they sell their primary home, as long as they’ve lived there for two of the past five years.
No magic tools exist to forecast the impact of the new tax law on Cincinnati real estate. If history is any indicator, the local market is resilient and adapts to the changes. Some sellers of higher priced homes in high property tax areas may (and we’re still in the adjustment/guessing stage) have to adjust list prices. The late date of the bill and the start date just days away- many owners are scrambling to pay their property taxes before December 31st- so it will be deductible on tax filing for 2017.
Stay tuned for further updates or Call or Text with questions.