I am certainly not a tax expert (I am more of an expert on paying taxes) and found this article interesting. I found it on Golf Advisor of all places. Consult with your Tax Adviser about your personal implications. This is NOT tax advice!
Passed on December 22, the measure constituted what accounting and financial services giant PricewaterhouseCoopers called, “the most significant overhaul of the US tax code in more than 30 years.”
This bill has some implications for the real estate market. If you’re considering a move – either part-time or permanent – here are some factors to consider:
Property tax deductions
Under the new tax scheme, homeowners can only deduct $10,000 worth of property taxes they pay. Of course, that’s only the case for homeowners whose mortgages are for $750,000 or less. Before the passage of the bill, that upper limit was $1 million. There are probably plenty of residents of houses in the $750,000 to $1 million range who have seen their tax obligations increase because of this change to the law. In some places, like Jersey City, New Jersey, this is causing property tax burdens to spike dramatically.
Still, it could have been worse. Early drafts of the Tax Cuts And Jobs Act proposed to disable multiple homeowners from deducting the property taxes on any residences beyond their primary ones. Backlash against this prompted an adjustment to the bill, such that now, if you have two mortgages totaling $750,000 or less, you’ll still be able to deduct that property tax. But in order to take that deduction, you will have to itemize your next tax return.
Varied though their impact may be, increases on property tax burdens make the prospect of living in states with lower property taxes an attractive one. States like Hawaii, Alabama and South Carolina are among the least property-tax-burdensome in the country.
Rent or buy?
Many people drawn south and west by the prospect of warm year-round weather and lower property taxes are not inclined to jump in fully. Instead, they’ll dip a toe in the water by renting a place for the fall and winter months, living as traditional “snowbirds.” By doubling the standard tax deduction, the Tax Cuts And Jobs Act makes renting – even longer-term than a few months – a more attractive proposition than it had been. Per an article from Time.com:
“One recent study by the Urban Institute found that under the new tax law, so-called “breakeven” rents — the monthly amount above which renters are better off becoming homeowners — jumped significantly for upper-middle class and wealthy taxpayers. For instance, under the old rule, for a typical three-person family earning $75,000 owning became more financially advantageous once the family’s monthly rent exceeded $893. Under the new law that number climbs 14% to $1,017.
For wealthy families the difference can be even more dramatic. For one family making $300,000, the breakeven rent jumps 32% from $2,757 a month to $3,631.”
So, depending on your circumstances, if you were leaning “buy” before, run the numbers again and you might end up leaning “rent,” at least in the near future.