Luxury Valley Homes Scottsdale Blog


Tax Reform – Reference Page | Luxury Valley Homes Scottsdale

Tax Reform That Effects Real Estate Owners and More

1.  Mortgage Interest Deduction

Tax reform - There was concern that the mortgage interest deduction (MID) would be eliminated. That didn’t happen. However, the bill has made the following changes:
  • Reduces limit on deductible mortgage debt to $750,000 or new loans taken out after 12/14/17 (from the existing $1,000,000). Current loans up to $1 million are grandfathered.
  • Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount refinanced.
  • Repeals deduction for interest paid on home equity debt through 12/31/25.
  • Interest is still deductible on home equity loans if proceeds are used to substantially improve the residence.
  • Interest remains deductible on second homes but subject to the limits.

2.  State and Local Taxes (SALT)

There was concern that the state and local tax deduction (which includes property taxes) would be eliminated. That didn’t happen. The final bill allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes.

3.  Exclusion of gain on sale of a principal residence

There was concern that owners would now need to live in their house for at least 5 out of the last 8 years to claim this exemption. Under the former tax framework, a typical owner, who has lived in their house for at least 2 years out of the last 5 years, would pay nothing in capital gain taxes if they sell the house. No change. The new code will remain the same as the old.

Other links that might help:

TAX CUTS AND JOBS ACT The final proposal put up for a vote by the Conference Committee.
H.R. 1 – The Tax Cuts and Jobs Act  The National Association of Realtors’ (NAR) Issue Brief. More information on other aspects of the bill.

What will be the impact on the real estate market?

Please read disclaimers at the bottom of this page.  The most thorough analysis of how tax reform will affect the housing market has come from Capital Economics. Here are some highlights:
  • The tax bill could raise the net costs of buying. But, given most households will see an overall tax cut, and potential buyers are likely to put that saving towards their home, we doubt it will have a significant detrimental impact on the housing market.
  • Most households stretch themselves when buying a home, and to the extent that the new code will cut taxes for most households, the overall change could be positive for the housing market.
  • The impact on expensive homes could be more detrimental, with a limit on the mortgage interest deduction raising taxes for that itemize.
Here is their full analysis (7 pages): US HOUSING MARKET FOCUS: Buying still better than renting in the long run Calculated Risk’s Bill McBride weighed in on the subject. Here are some highlights:
  • The impact of reducing the MID from a maximum of $1 million in mortgage debt to $750 thousand in mortgage debt will have a very little impact on the housing market.
  • State and local taxes (SALT) will have an impact on housing in some areas. Some people might choose to live in one state over another (if they have a choice), based on taxation. This could impact demand in certain states – especially for the middle and upper-middle class homeowners.
  • The corporate tax cuts (and other tax cuts) will mostly benefit the wealthy, and this will be a positive for the high-end real estate.
  • There will be some negative impact based on SALT, but overall the impact of these policy changes on housing will be minimal.
Here is his full analysis: A few comments: Housing and Policy Mark Zandi of Moody’s Analytics had a more negative opinion. Here are the highlights:
  • House prices suffer under the tax plan. The tax law changes significantly reduce the value of the mortgage interest deduction, or MID, and property tax deductions, which are capitalized in current house prices.
  • Higher mortgage rates that result from the higher budget deficits and debt under the plans will weaken housing demand.
  • The hit to national house prices is estimated to be near 4% at the peak of their impact in summer 2019. That is, national house prices will be approximately 4% lower than they would have been if there were no tax legislation.
  • The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizers, and where homeowners have big mortgages and property tax bills.
  • The impact on the broader national economy of the higher stock prices and lower house prices is largely a wash.
Here is his full analysis: U.S. Macro Outlook: A Plan That Doesn’t Get It Done

Other links that might help:

Tax Bill Raises Concerns About Homeownership Early consumer reaction to the new Tax Reform legislation and how it may affect their buying and selling decisions.
Examples of How The New Law Will Affect the Tax Incentives of Owning a Home Early consumer reaction to the new Tax Reform legislation and how it may affect their buying and selling decisions.
Which Local Housing Markets Would Be Most Impacted by the GOP Tax Plan? The new tax code includes two changes to the income tax structure that could potentially have significant impacts on homeowners, and by extension the housing market.
On this site, ATTOM Data Solutions created two heat maps to illustrate which local housing markets could have the most homeowners impacted by these changes.
Tax plan to impact at least 11 percent of Southern California home buyers This article takes a deeper dive into the impact on Southern California the below data from the ATTOM site.
How New Yorkers Would Lose Under the Republican Tax Bill This article takes a deeper dive into the impact on NYC and the surrounding region.
Could tax reform actually be good news for housing? This article explains that one expert believes tax reform could increase the supply of homes by reducing federal tax subsidies.
How the Tax-Cut Bills Could Affect Homeownership This article from Consumer Report talks about the possible impact on both buyers & sellers.
Deduction Rollback Hurts High-Tax States, But Exodus Isn’t Assured (WSJ subscription required) A great analysis of how taxes affect where people decide to live.

More Helpful Information

Please read disclaimers at the bottom of this page.  
How Tax Reform Impacts Homeowners in Each State This site, run by NAR, hopefully, will be updated now that the tax reform bill has become law. It gives you state-by-state data on tax deductions, capital gains exemptions, and the potential impact on housing prices from the 2017 tax reform framework. You can download information for your state by clicking their map.
Which Places Pay the Most in Property Taxes? This site gives you an interactive map where you can find the median property taxes by county.
Reforming the mortgage interest deduction: A chance for fairness for American taxpayers? This article gives the argument for why the changes made sense. We are not saying we agree so please don’t attack us for the content. We just want you to better understand the other side, so you are prepared for those conversations.
And remember…
Some people will overreact to any change. In the current political environment, reactions from both sides may be even more passionate. In the end, Jason Furman, a Harvard Kennedy School economist, may be proven correct:
“Nothing in my experience suggests that the views people have about the tax cuts – whether justified or not – will change after they start actually being affected by them.”
It is our job to remain objective and report the facts - As we say at Luxury Valley Homes:
“It’s not good news. It’s not bad news. We're just reporting THE news.”
Disclaimer #1: This page is not meant to be a resource for tax advice but instead a resource for basic information concerning the aspects of the new tax code and how it may impact the real estate market. Our views herein provide broad guidance to the industry. The specific impact on each individual and property will vary. Therefore, your clients and customers should get tax advice from their accountants or financial advisors who will explain how the entire tax code will affect their personal returns.
Disclaimer #2: We wanted to get this information to you as soon as there was a final bill presented to the President to sign into law. Some of the commentaries on this page may be revised as the analysis of the bill and future law evolves. As further clarification of the new code and deeper analysis becomes available, we will update this page.
Update #1: It seems that the President may wait until the New Year to sign this bill into law. As such, there may yet be negotiations that take place which could impact the bill itself or the bill’s impact on housing. We will be keeping a close eye on official changes and will update this page if necessary.
Read more about the Luxury Valley Homes team.


Luxury Valley Home Registered TrademarkJane Daley, BA
Jeff Daley, PhD
Luxury Valley Homes - West USA
Scottsdale Real Estate Arizona
Our Luxury Valley Home Team

Comment balloon 1 commentJane & Jeff Daley, PhD • December 21 2017 11:41PM
Tax Reform – Reference Page | Luxury Valley Homes Scottsdale
Tax Reform That Effects Real Estate Owners and More 1. Mortgage Interest Deduction Tax reform - There was concern that the mortgage interest deduction (MID) would be eliminated. That didn’t happen. However, the bill has made the following… more
Housing Affordability: Luxury Valley Homes Scottsdale
Housing Affordability - Luxury Valley Homes Scottsdale The Monthly Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels… more
Veterans Day Parade 2017 – Phoenix, Arizona | Luxury Valley Homes AZ
Veterans day parade 2017 is being presented by the Honoring Arizona’s Veterans (HAV) organization that has presented the annual Phoenix Veterans Day Parade 2017 for its 21st year in a row. This year it was held on Saturday, Nov. 11. Television and… more
Winfield Community Amenities 2018 - Scottsdale 85266
Winfield Real Estate Arizona is located on the Northeast side of Scottsdale Arizona. It’s a community that rests at the base of one of the most exquisite cacti and boulder-studded mountains in the southwest. Winfield Estates 85266 offers both… more
7710 E Evening Glow Dr, Scottsdale, AZ 85266 | WinfieldEstates. com
Search current inventory of Scottsdale Real Estate Arizona Homes for Sale in Winfield Listing Details Magnificent Arizona Sunsets From this Beautiful Home 7710 E Evening Glow Dr, Scottsdale AZ, 85266Price: $940, 000Arizona Multiple Listing Service.. more
Veteran’s Day | It’s History and Meaning To Those That Served
Veteran's Day Personal Comment For all of us that have served, we do not need a day set aside to honor our brothers/sisters. For most of us, they are with us almost every day, especially our friends and combat buddies we lost on the field of battle… more
Buying Remains Cheaper Than Renting in 39 States!
In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States. The updated numbers show that the range… more
Hiring Agents: Selling Your House May Cost You NOTHING! –…
Hiring Agents - There is no doubt that it is easier to sell your house when using the services of a local real estate professional. The agent will provide: Greater exposure to more buyers The skills of a professional negotiator A layer of… more
Thinking Selling? You Should Do It TODAY! - LuxuryValleyHomes. com AZ
Thinking selling? - That headline might be a little aggressive; however, as August 2017’s housing market data begins to roll in, we can definitely say one thing: If you are considering selling, IT IS TIME TO LIST YOUR HOME TODAY! In a recent… more
Market Insider 85266 2017-10-14 | Scottsdale Real Estate
Market Insider 85266 2017-10-14 - The data on this page is consolidated from multiple sources and includes current listings, recent sales, and more. Whether you're a buyer or seller, the knowledge you gain will help put you in control of your real… more