“Raindrops are falling on my head…” Here I am, all dressed up in a suit and tie yet I gave my umbrella to my wife. So while I may be a gentleman, I will be the WET gentleman at a real estate class today. C’est la vie. My inconvenience pales in comparison to the gratitude in my wife’s eyes as she scored my umbrella.
Since this is my first letter of 2018, I should have started with Happy New Year! I hope you had a wonderful holiday season. If you are like me, you love the holidays BUT it’s really nice to put away Christmas and charge into the New Year. So in that spirit... I am back in the gym on my gimpy knee (recent ACL/MCL surgery) and ran into a Murrieta real estate client who asked about the new Tax Cuts and Jobs Act of 2017.
What a great topic for this month’s letter! Many people are concerned the new tax law will negatively impact Murrieta home values. That remains to be seen but here are key changes homeowners should know:
· There is now a cap of $10,000 for state income tax and property tax deductions
· You cannot deduct mortgage interest beyond the interest on a $750,000 acquisition loan debt
· You can no longer deduct mortgage interest on equity debt (equity line)
Many Murrieta home owners with higher special assessments won’t be able to deduct their full property taxes and, due to low interest rates, aren’t deducting a lot of loan interest. So instead of itemizing, they’ll get:
· A standard deduction increased to $12,000 for single, $18,000 for head of household, and $24,000 for married tax payers (this will benefit many with low interest rates and definitely renters!)
· An increased child tax credit to $2,000 per child with phase out increased to $400,000
The bottom line is there are both pluses and minuses but many Temecula and Murrieta homeowners will benefit more if they have lower property taxes and interest rates. Renters will definitely benefit from the higher deductions thereby enabling them to buy homes in the future versus renting. Adding to this is the recent raising of loan limits across the board (conventional, FHA, VA) that should further drive our home market higher in 2018.
Stefan aka Mr. Murrieta
P.S. Enjoy the rain. What’s better than falling asleep and waking up to that wonderful sound?