Ownership incentives reduced

Congress recently passed the Tax Cuts and Jobs Act, enacting sweeping legislation to our tax code. The National Association of Realtors lobbied heavily prior to its passage to ensure key points would not threaten home ownership and eliminate key tax incentives. The new bill will likely lower most individual taxes in the short term; however, the long-term impact is yet to be seen since these tax provisions will expire in 2025. What can we expect in Santa Fe and how will this impact our local housing market?

The new code does limit the amount of interest homeowners can deduct from their taxes with the mortgage interest deduction. The new cap is $750,000 for new loans taken out after Dec. 14, 2017. And while the interest is deductible on second homes, the cap remains, and the total is cumulative. Additionally, the interest on a home equity loan may no longer be deductible unless the homeowner can show evidence that the loan was used to substantially improve the residence. While the amount of $750,000 may sound to some as though it is significant, there are many states where this will have a major impact— take California, where the median listed home price is $499,000. And should an individual with a $450,000 mortgage with an equity line of $100,000 decide to buy a vacation home here, his qualifying deductible mortgage may be capped at $200,000. That will not buy much in Santa Fe.

Another change for homeowners per the new tax code will be the cap of $10,000 on state and local property taxes and income taxes. While we are blessed with reasonably low tax rates in New Mexico, many states have higher income and property taxes. The National Association of Realtors believes that these two new key points of legislation will have an impact on our real-estate market and is predicting slower growth in housing prices by between 1 percent and 3 percent. However, in areas with high real-estate costs and higher taxes, NAR predicts a decline in home prices. In Santa Fe, roughly 40 percent of sales in the luxury-home market in the past six months were financed. It is conceivable that this new legislation will impact that market and cause a stall in home prices in the top tier.

The new tax bill still retains seven tax brackets and most of these have been reduced. Many Santa Feans will see a reduction of their taxes, at least until 2025. The biggest change will be to the standard deduction, which increases from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for those filing joint returns. The National Association of Realtors “believes that by doubling the standard deduction, Congress has greatly reduced the value of themortgage interest and property-tax deductions as tax incentives for homeownership. Congressional estimates indicate that only 5 to 8 percent of filers will now be eligible to claim these deductions by itemizing, meaning there will be no tax differential between renting and owning for more than 90 percent of taxpayers.”

We highlighted the apathy already expressed by many millennials in the “American Dream.” We can not allow the idea of home ownership to be kicked to the curb. The significant difference in net worth in time can de directly attributed to home ownership, and to allow a nation of renters to increase thewealth of the few is to undermine the very basis of our democracy. For what do we have to fight for if not for the American Dream?

Roger andMelissa are Realtors at Keller Williams. Melissa was the 2017 president of the Santa Fe Association of Realtors. Call them at 505-699-3112, email twicethesellingpower@gmail.com, or follow them on Twitter @CarsonandCarson and at www. facebook.com/carsonandcarson.santaferealestate