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The New Tax Law: How Will The Tax Overhaul Affect The Economy?

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Among the homes for sale on St. Petersburgs Snell Isle is a waterfront house whose owners have lived there so long the property taxes are just $14,706 a year. Theyve been able to deduct that entire amount on their income tax.

If the house sells for the full $2.2 million price, the property taxes will jump to as much as $42,644. But the new owners will be able to deduct just $10,000 of that.

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Could losing so much of a deduction on property taxes scare off potential buyers? Thats one of the questions hanging over the sweeping tax overhaul soon to be signed into law by President Donald Trump.

The new law is a mixed bag for the residential real estate business, one of the mainstays of the economy in Tampa Bay and other popular parts of Florida. It contains provisions that could prompt more people to move here and buy homes, a boon to Realtors. But those same provisions will negatively affect thousands of existing bay area homeowners.

The changes approved by Congress limit to $10,000 the amount of property taxes that can be deducted; until now there has been no limit. And while homeowners previously could deduct interest on up to $1 million of mortgage debt, the new law slices that to $750,000 on loans taken out after Dec. 15.

The property tax limit will affect nearly 19,000 current bay area homeowners who annually pay more than $10,000, the real estate data firm CoreLogic found. And as a gauge of how many buyers might be affected by the mortgage interest deduction, 588 owners have taken out loans of at least $750,000 this year in Pinellas, Hillsborough and Pasco counties, records show.

For prospective buyers, the changes will be significant or maybe not.

"The people that buy $2 million, $3 million, $4 million homes are not buying because they get that deduction on their property taxes, says Martha Thorn, a Pinellas Realtor who specializes in luxury properties. "I dont think its going to be that big of a deterrent.

Jennifer Zales, a Tampa agent who also deals in luxury homes, agrees.

"My higher net worth clientele are not really looking at the reduced mortgage interest deduction as a major influence in making a purchase, she said, noting that "many of them are cash purchases.

But both Thorn and Zales say there could be an impact on the lower end of the luxury market homes selling for around $1 million, an increasingly common sum for waterfront houses or those in gated communities.

Many buyers at that price point finance their purchases, Multiple Listing Service records show. Of the 218 Tampa Bay homes that sold for between $1 million and $1.5 million in the last six moths, 60 percent involved financing.

"If a buyer was already stretching to qualify to buy a million-dollar home, then the mortgage limits and property tax would be more of a factor, Zales said.

Florida agents released a collective sigh of relief when the final version of the bill omitted a controversial change involving capital gains taxes.

Married couples can still exclude up to $500,000 (or $250,000 for single filers) from capital gains taxes when they sell their primary home as long as they have lived there for two of the past five years. Earlier proposals would have increased the requirement to five out of the last eight years.

Eliminating that provision "is a huge win for both buyers and sellers, Zales said.

For the vast majority of Tampa Bay residents who dont have million-dollar homes, the new law still could sting. Interest on home-equity loans a relatively common way to capitalize on the equity in a home can be deducted from now on only if the proceeds are used to substantially improve the primary residence. That should make homeowners think twice about tapping equity for college costs, a new car or a fabulous vacation.

For whatever negative impact the tax overhaul might have on Tampa Bay homeowners and buyers, agents note that it will be even worse on states such as California, New York and New Jersey that have state income taxes as well as high property taxes. Homeowners there will be able to deduct only $10,000 worth of combined taxes.

As a result, Florida, with no state income tax, looks more desirable than ever.

Agent Bonnie Strickland, who currently has several multi-million dollar homes listed in St. Petersburg, has fielded numerous calls in recent days from out-of-state residents considering a move to Florida. Among them: a New Jersey buyer about to sign a contract.

And "we expect to have many showings right after the new year, she said.

She and other Realtors note that home prices in Tampa Bay remain relatively affordable compared to those in other parts of the state and country. In November, the bay areas median single-family home price was $225,000, lower than that in Miami, Orlando, Jacksonville, Naples, Sarasota and even Port St. Lucie.

"We live in paradise, said Jeff Shelton a Tampa agent who has sold high-end homes to buyers from high-tax states. "We have the weather, the beach I dont think anything is going to stop people from coming here by any means.

Contact Susan Taylor Martin at [email protected] or (727) 893-8642. Follow @susanskate.


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Source : http://www.tampabay.com/news/business/realestate/Here-s-how-the-tax-overhaul-could-affect-homeowners-in-Tampa-Bay_163748774

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