Some real estate professionals have referred to Trump’s new tax plan as a huge blow to the modern American Dream of homeownership. They believe the possibility of falling home prices could lead to a newer generation stuck renting and many leaving higher-cost cities and states.
These specific concerns may be an exaggeration. Understanding what the new tax plan from President Trump means for first-time home buyers matters. If you’re considering buying a home, it’s very important to understand how the new tax plan impacts you.
With many changes coming to Trump’s tax plan before it became a reality, it can be a bit confusing. Below, we will explore how the Republican tax plan may impact the real estate market in Dallas and all across the country.
First-Time Home Buyers are Buying Homes in Dallas, TX with Little or No Money Down!
How the New Tax Plan Impacts the Real Estate Industry
There are a few major ways the new tax plan will impact home buying and selling. The first major change was made to how much mortgage interest can be deducted on one’s taxes. The previous limit for the combined amount for a primary and secondary (vacation) homes was $1 million. The new limit is $750K.
The new tax plan from President Trump also limited the amount of state and local property taxes one can deduct. The cap is now set at $10K, which will impact a large number of homeowners in Dallas, Texas and across the country.
Along with these two changes, which may be taken as negatives, a few other changes can certainly be viewed as positives. The Historic Tax Credit (HTC) will help those looking to renovate historic properties. This credit was continued in the new tax plan at 20%, as long as the property is a certified historic property. However, the new deduction will be spread over five years.
The Low-Income Housing Tax Credit was also retained at 4%, which helps to fund about 33% of the affordable housing construction across the country.
First-Time Home Buyers are Buying Homes in Dallas with Little or No Money Down!
In addition, the earlier plans of this new tax plan would have eliminated property tax deductions completely and cut the mortgage-interest cap further. The new plan also maintains the capital gains exclusion from the primary residence sale. This is good news, as sellers can still exclude up to $250K if filing single or $500K if filing jointly.
What does This All Mean for First-Time Home Buyers & Other Buyers?
The impact of the new tax plan from Trump on first-time home buyers won’t be very big. According to data from realtor.com, the new plan will only impact about 1.3% of new mortgage, which will come from the wealthiest homeowners, found in the most expensive areas of the country.
In addition, some experts believe the national housing prices may fall by about 4%. This could be good news for first-time home buyers, as properties become less expensive and easier to purchase. On a national level, not many people will really be impacts. However, in some of the areas where housing costs and taxes are super-high, the impact will be felt.
The new tax plan isn’t expected to keep potential buyers from becoming homeowners, however. Many Americans believe homeownership is the American Dream and many don’t care for the idea of spending a lifetime paying rent. However, some of the potential home buyers on the very low end may be dissuaded from buying since they won’t save as much by owning.
It’s very possible that President Trump’s new tax plan could lead to falling home prices and more money in the paychecks of potential buyers. For first-time home buyers, this could be very good news. With more money to spend and housing prices coming down a bit, it could lead to even more buyers entering the market.
Putting it All Together
It seems that some real estate experts are worried about the tax plan from Trump. However, others are not so concerned because many homeowners have already stopped using the mortgage deduction. According to the Pew Charitable Trusts, only 21.5% claimed the mortgage interest deduction in 2015, which led to an average write-off of $8,612.
The new plan was changed in a few ways before it was finalized, which did cause some confusion. For homeowners, it may not have as big of an impact as some would like to think. The largest impact won’t be felt by most first-time home buyers.
Helpful information: 15 Must-Do’s For the First-Time Home Buyer