During the last week of September, the long awaited Tax Reform proposal was announced. As expected, there are changes that may have a significant impact on home buying decisions if the plan is passed in its current form. I see the proposed increase in the standard deduction and elimination of property tax deduction as the two most significant elements of the plan that will affect the average home purchase decision.
As part of the plan to “simplify” the tax code, the standard deduction will double to $12,000 for individuals and $24,000 for joint filers. Under this new plan, mortgage interest deductions may no longer be useful if the total of all deductions does not exceed the new limit. With the elimination of the property tax deduction, it becomes that much harder for the itemized deductions to exceed the new limit.
While I understand buying a home is more than just tax benefits and consequences, these factors are a part of the purchase decision to some degree or another. Few people make purchase decisions on the basis of interest rates alone, but rates are a factor in the decision. Likewise, I imagine few people would buy (or not buy) on the sole basis of the new tax code, but I believe the new code will be a factor.
On its surface, the new tax code appears to remove some incentives of homeownership. To what degree it will impact the overall market in Silicon Valley is anybody’s guess. On the one hand it’s easy to believe any incentive removal will have a negative impact. However, it’s also possible that the local economy is so strong that the removal of these incentives will have very little impact. Another argument can be made that a reduction in buyer demand will bring better balance to our local real estate market.
As your trusted Realtor® :) it’s not my role (or interest) to determine if the new tax code will be good or bad for home sellers or buyers. My role is to help you understand different perspectives on how it may impact the market and your options. When you know your options, you can make better decisions.
Prepare Now Before The Weather Gets Nasty
With such great October weather in the Bay Area, it’s easy to forget that it’s a good time to prepare
your home for harsher weather coming in late fall and winter. At the very basic level, inspect roofs for leaks and make sure gutters are clean. Check seals in windows and doors to prevent water and outside air leaks. And, make sure the heating systems are working properly. Also, double-check your homeowner’s insurance policy to make sure critical items or events are covered. The internet has plenty of checklists and guides to help you prepare your home. Contact me for a list of my favorite links. Remember, taking precautions now can save you a lot of time, money, and heartache in the future. Take the time to prepare now!