With so much talk of Trump’s new Tax Reform Bill, I’ve been hearing from many people asking what this means for home values, specifically as they relate to the valley. Prior to the bill being passed there were so many revisions that many people are left unsure of what exactly is happening within this bill. More importantly, I am finding that homeowners are fearful of what will happen to the values of their homes.
On December 22th, 2017, President Trump signed the tax bill into law, and here is the change that affects homeowners;
- The mortgage interest deduction cap will fall to $750,000 from the previous amount of 1 million dollars.
What Tax Reform Means For You As A Homeowner
In order to get the mortgage interest deduction, a taxpayer must itemize. By doing this, homeowners are able to deduct the amount paid in interest on their home loan from their total taxable income. However, it may no longer be in the best interest to itemize, if someone has a mortgage over $750,000. I want to emphasize this, because the majority of people in Arizona do Not have a mortgage over that $750,000 mark. So for many this will results in ZERO IMPACT.
Also, I do not personally believe that the mortgage deduction is the deciding factor when it comes to people choosing to purchase a home here in Arizona. So I am not concerned with a halt in the growth of the market here in the valley.
The Law of Supply and Demand Always Wins
I talk about this every single time I sit down with a seller ready to list their home. It comes down to the laws of supply and demand. Now if everything you learned in Econ 101 went in one ear and out the other, I’ll break it down for you. When supply is down and demand rises, so do prices. As we close out 2017 we find ourselves with supply down 6% and demand up roughly 12%. This is good news for sellers!
Now while there will be negative impact on homeowners in states with high taxes,such as California, New York, and New Jersey, this could actually benefit the Arizona housing market. California is the #1 state that people move to Arizona from. With the tax law impacting them negatively, the appeal of a move to Arizona becomes that much more enticing! So while some people fear these changes, I believe we could actually see a net gain from these changes.
If you still have any questions on what tax reform means to you and your Arizona home, or if you have any questions about buying or selling a home, give me a call!
The Sibbach Team and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.