Trump Tax Plan and Home Valuation

rickr

New member
2 Part question, looking for opinions.

Do you think the changes proposed by Trump administration on itemized deductions related to mortgage interest and property tax will pass?

If so, what kind of effect will it have on Irvine home prices?

From my perspective, I would not be a happy camper if it passes.
 
I have no idea if they will pass or not.  However if they do pass, then without doubt it will put downward pressure on home prices.
 
I doubt it would have any major impact. Canada doesn't have tax deductions, but look at home prices.
 
aquabliss said:
What!?  No more deduction for my outrageous MR's?! 

i would think a large proportion of irvine buyers would have their property tax deduction negated by AMT anyway.
 
dethman said:
aquabliss said:
What!?  No more deduction for my outrageous MR's?! 

i would think a large proportion of irvine buyers would have their property tax deduction negated by AMT anyway.

This is true about property taxes, but most of Irvine will have MID. 
 
OCLuvr said:
I doubt it would have any major impact. Canada doesn't have tax deductions, but look at home prices.

Canada not having a tax deduction does not support your opinion in any way...
 
I saved about $400/mo in taxes in 2016 thanks to these deductions and do take them into account when comparing owning to renting.

Here's my current own vs rent:

Rent
Approximately $3,500/mo for a 2000sqft detached home in Irvine

Own
Opportunity Cost on home equity of $400k. If invested in a 5yr CD earns about $500/mo after taxes.
Interest on mortgage: $950/mo
HOA: $250/mo
Property Tax: $800/mo
Home Insurance: $50/mo
Tax savings on interest & property tax: $400/mo
--------------------------------
Total: $2,150/mo (plus maintenance costs)

So it's clearly better for me to remain in my home than rent. My cost to own will remain relatively stable (interest will slowly decline, property tax will slowly increase) while my cost to rent would rapidly increase (5-10%/yr seems the current norm).

Taking away my $400/mo tax savings wouldn't move the needle too much. If interest rates go up significantly (to 6-7% on mortgages), I could earn more than double on my equity in a CD and the interest I pay could double as well. It still would more only close to neutral between renting and owning.
 
Hypothetical Question around Trump's tax plan:

If the mortgage interest deduction limit is reduced - not eliminated as some are speculating, does that go into effect starting Jan 1, 2018 or will that be retroactive to 2017 assuming that it is passed this year.  Not sure if there are any tax experts who can weigh in on that.

Thank you...
 
Larkfield52 said:
Hypothetical Question around Trump's tax plan:

If the mortgage interest deduction limit is reduced - not eliminated as some are speculating, does that go into effect starting Jan 1, 2018 or will that be retroactive to 2017 assuming that it is passed this year.  Not sure if there are any tax experts who can weigh in on that.

Thank you...

Doubt that they would make it retroactive to 2017, if it does even happen.
 
USCTrojanCPA said:
Larkfield52 said:
Hypothetical Question around Trump's tax plan:

If the mortgage interest deduction limit is reduced - not eliminated as some are speculating, does that go into effect starting Jan 1, 2018 or will that be retroactive to 2017 assuming that it is passed this year.  Not sure if there are any tax experts who can weigh in on that.

Thank you...

Doubt that they would make it retroactive to 2017, if it does even happen.

I'm hoping  they make it applicable only to mortgages taken out after Jan 1st 2018 :)
 
Larkfield52 said:
Hypothetical Question around Trump's tax plan:

If the mortgage interest deduction limit is reduced - not eliminated as some are speculating, does that go into effect starting Jan 1, 2018 or will that be retroactive to 2017 assuming that it is passed this year.  Not sure if there are any tax experts who can weigh in on that.

Thank you...

if passed, the proposed "tax cuts" would apply to your 2017 income as well, so goes both ways.  but i think the deductions goes with it. 
 
USCTrojanCPA said:
Larkfield52 said:
Hypothetical Question around Trump's tax plan:

If the mortgage interest deduction limit is reduced - not eliminated as some are speculating, does that go into effect starting Jan 1, 2018 or will that be retroactive to 2017 assuming that it is passed this year.  Not sure if there are any tax experts who can weigh in on that.

Thank you...

Doubt that they would make it retroactive to 2017, if it does even happen.

Government works s l o w l y.

If the deduction is limited to $500K only affects the interest paid on mortgages between $500K to a Million. Over that was already eliminated.

You would get additional standard deduction so that should help.

No deduction for property taxes might hurt but that's eliminated with AMT anyway.

I remember hearing back in the 80's that eliminating deductibility of non mortgage interest would hurt the economy. Retailers whined no one would want to charge clothes and car dealers complained people wouldn't be buying cars with car loans. In the 80's interest rates on credit cards were in double digits and all the complaining was for naught.

I think it won't have that much of an impact.

 
Additional standard deduction does nothing to offset loss of significant deductions such as property taxes, mortgage interest or state taxes.  IMHO the 'limited' details I have seen on the potential tax plans are total garbage, the only positive being elimination of AMT.  I don't personally care about making them 'simpler' but care greatly about paying more.  No way this doesn't amount to anything but a tax increase for many in Orange County.  If that's the path they want to take leave them the same.
 
Bloor said:
I thought Mello Roos taxes were not deductible anyway... just the normal state property tax.

Technically part of Mello Roos is tax deductible...you'll just need a CFA to figure out how much you can really deduct.  :p
 
Just to follow up on this topic, interesting read from this morning.  If the elimination of state and property tax deduction happens and it is backdated to Jan 1, still imagine that this is an effective tax increase on some of the higher cost living areas regardless of how much you reduce the federal brackets. 

Plan still light on details and I have my doubts that this will get done by year end.  Still not wild with the prospects of December getting an effective tax increase going back to Jan 1

https://www.cnbc.com/2017/09/12/mnu...-number-one-priority-we-will-get-it-done.html

 
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