What Will the New Tax Laws Mean for Real Estate?PDH Staff
In December of 2017, Congress passed the Tax Cuts and Jobs Act. The new laws will impact not only businesses but also individuals and families — including those looking to buy homes this year. Changes to the tax law this year undoubtedly affect your industry as a real estate agent.
Your real estate training will likely begin covering the new tax law, but this does not mean that you should not start with an understanding of the changes now. As a real estate agent, you may be wondering how the new tax legislation will influence your industry. This guide will help you understand what to expect with new rules in place.
For items deemed in service between 2017 and 2023, owners can expect to see a possible bonus depreciation at 100%. Formerly, the depreciation value was granted at 50%. For you to receive the full amount of money, the item must be recently acquired, though not necessarily new.
Why is this relevant to new homeowners? The new rules include roofing, HVAC systems, alarm systems, and security systems. If you own or buy a rental property, you may be able to say hello to new deductions.
For those who own homes between 2018 and 2026, a reduction in mortgage debt interest up to $750,000 is possible. You may see that people living in expensive homes are less willing to move at this time. With fewer people moving out of these high-cost homes, buyers may be considering moving into less costly houses.
Increase Standard Deduction
Your real estate training likely touches on tax law, including the standard deduction for individuals and married couples. With the new law, the standard deduction nearly doubles to $12,000 for individuals and $24,000 for married couples.
These new laws indicate that individuals in the future will be less likely to turn to itemizing. Most individuals with mortgage interest and SALT deductions will not exceed these new limits. The value of mortgage interest and property tax deductions are not as relevant to homeowners as a result.
All of this goes to say that most homeowners will not benefit from a tax differential here. Owners and renters will experience little to no tax difference where there was once a significant one. Of course, owners and buyers should always consult with a tax professional to receive a personalized description of how purchasing a home may affect their finances.
After-Tax Housing Costs Increase
Under the new law, homeowners may see an increase in after-tax housing costs. Buying a home may not seem as desirable as renting for first-time buyers. Of course, location, home cost, and family needs will all play a role in this decision-making process.
Real estate training should prepare you for the financial aspects of running a real estate business. If you need to brush up on new finance laws and how they relate to your job, you might consider continuing education courses that also help you renew your real estate license. Choose your state now!