President Donald Trump’s piece of tax reform, the Tax Cuts and Jobs Act (TCJA), went into effect on 2018 tax returns. As a result, agencies are starting to gather and analyze data on the impact of the law. One specific area of concern: did the new tax law impact the housing market?
Why would tax reform impact the real estate market? Part of the reform included a limit on the amount of mortgage debt a homeowner can use as a tax write-off.
Has there been a change? According to the New York Federal Reserve, the TCJA has negatively impacted the market. The study points to tax changes along with interest-rate increases to explain the drop-in sales volume.
Groups representing realtors also voiced concerns that areas hit hardest by the change would include “high-cost coastal markets.” Although this could impact markets in Florida, it is important to note the TCJA also included a change to state and local tax (SALT) deductions. The law put a $10,000 cap on this deduction. This cap had a huge impact in high tax states, like California and New York, but less of an impact on low tax states like Florida.
Thus far, home values do not appear impacted. However, the actual volume of sales has decreased.
What does this mean for the real estate market in Florida? Because the SALT cap appears to have had a large impact on the volume of sales in high tax areas, it is likely sales in Florida will increase.