New Tax Law When Selling A Home
Dear Phyllis,
My husband and I are in a position to retire now or we could wait several more years. We own a vacation home in Palm Springs and can live there until we decide where we want to move. Housing prices are so high and I am fearful of the implications of the new tax law. How do you think the new tax law will impact real estate sales?
Timing our move
Dear Timing,
It’s always best to discuss tax implications with your accountant or CPA.
But here’s my take:
In December half of La Canada home sales were over $1,620,000 (median selling price). Taking a look at the new tax plan: Assume a 20% down payment on that median selling price which will give this median buyer a loan amount of $1,296,000 – allowing for a mortgage interest deduction of just $750,000 (previous interest write off was up to a $1,000,000 mortgage). In this same scenario, property taxes will be approximately $18,000, and the new law allows a maximum write off of $10,000.00. The reduced tax write off will impact the average La Canada home buyer but not the luxury high net worth buyers.
In December the median selling price for La Crescenta homes was $832,500 – so you can see that the new tax laws will have less impact for home buyers in La Crescenta.
Real estate is about supply and demand. A major reason Los Angeles housing inventory remains tight is that Homeowners are remaining in their homes longer than at any time in recent history. According to a recent survey by the National Association of Realtors, 2017 home sellers have been in their homes for a median of ten years. Prior to 2009, homeowners typically lived in their homes for only six years before moving.
As far as timing, if you are in a position to move now, it seems like a good time.
Best of luck to you.
