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    What does the GOP Tax Bill Mean for the D.C. Homeowners, Buyers, and Sellers?

     

    Plenty of homeowners, buyers and sellers are wondering how the tax reform legislation is going to affect their prospects this upcoming year and beyond. The plan, which is expected to lower income tax bills next year for many households, is the most significant overhaul of the tax code since 1986. No wonder it can feel overwhelming if you’re in the market.

    Several provisions that have a direct impact on the housing market have been added, removed or altered during the legislative process, and it’s not unusual for there to be speculation regarding its effects. Below is a look at how the final version could impact homeowners, buyers and sellers in the D.C area:

    1.The tax bill will slow price increases in expensive housing markets, which is great for buyers.

    Depending on whether you already own a home or are a prospective buyer, this could be good news or bad news. A Moody’s Analytics report released in December estimates that by the summer of 2019 home prices will be down nationally by 4 percent compared to where they’d be if no tax bill was passed.

    Keep in mind, this doesn’t necessarily mean that housing prices are going to drop. Instead, it means that the rise will slow compared the rate of rise we have been seeing. Take, for example, the price of a $500,000 Montgomery County home. Before the tax bill, its price was estimated to rise to $525,000 by the summer of 2019. Under the new legislation, it is only estimated to rise to $515,000, assuming a 3 percent increase instead of a 5 percent increase.

    2. The mortgage interest deduction cap and the elimination of the home equity debt deduction will shift the tax burden for some existing homeowners in D.C.

    But only after decreasing personal income taxes (if you’re married). The new law increases the standard deduction to $12,000 for single filers and $24,000 for joint filers. For many home owners it no longer makes sense to itemize deductions via the mortgage interest deduction and the property tax deduction.

    Homeowners can refinance mortgage debts that existed before Dec. 14 up to $1 million and still deduct the interest as long as the new loan does not exceed the amount refinanced. The new law caps the limit on deductible mortgage debt at $750,000 for loans taken out after Dec. 14. Loans made before that date can continue to deduct interest on mortgage debt up to $1 million. The interest on a home-equity loan can be deducted as long as the proceeds are used to substantially improve the home. Mortgage interest on second homes can be deducted but is subject to the $750,000 limit.

    3. No more moving expense deduction, which means planning for your move is more important than ever.

    Prior to the tax bill, you could have claimed moving expenses if your employer didn’t cover them, your new work location was a certain distance from your former home, and you worked a certain minimum amount of time in the first one or two years after your move. Under the new legislation, only active duty military members pursuant to a military order are able to deduct their moving expenses.

    For that reason, it’s extremely necessary to plan ahead for any moves with a detailed checklist. Do plenty of research to compare prices and see what kinds of moving help you’ll need, whether via a moving truck or a self-haul trailer, car shipping, or a garbage hauling service for your throwaways.

    4. Inheriting a home? Look forward to fewer taxes if it’s worth more than $5,490,000.

    Before the new law, the inheritor of an estate was eligible for up to $5,490,000 in deductions. The law doubles the estate tax exemption to $11.2 million, and includes inherited property values.

    5. If you’re buying a historic home, expect to take your 20 percent credit over a five-year period.

    The Historic Tax Credit was fixed at its current 20 percent rate in 1986 when Congress amended the federal tax code. It has allowed investors and developers to take a credit of 20 percent of the certified rehab costs they incur in renovating historic structures and has funded over 40,000 historic renovations since 1981. Such structures are identified as any building on the National Register of Historic Places or any building in a registered historic district that the government recognizes as significant to the district.

    The new law continues to provide a 20 percent credit when the certified historic property is placed into service but the new law spreads the deduction over five years instead of applying it as a lump sum.

    There’s still plenty to look forward to if you’re hoping to move to D.C or looking to relocate around the city. If you’re in the market, this could mean a better home for less. If you’re looking to sell, this gives you time to make the renovations you need to really invest in the value of your home. Either way, it’s an exciting time to be in the market and an even more exciting time to be watching it. Just be sure you have a trusted real estate agent along for the ride with you.

     

     

     

     

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