Miami’s real estate market could turn into the Wild West thanks to the new tax law. The massive, complicated tax reform bill was signed into law on December 22, but nobody really knows yet what it will mean for the real estate market in Miami.
There are parts of the bill that are clear, while other parts make less sense. This means that it wouldn’t be surprising for the law to undergo changes and corrections over the next few months and years.
But, what can we expect the new tax law to impact so far? These impacts are pretty straightforward:
A lower limit for the mortgage interest deduction
The new tax law will affect the mortgage interest deduction that most homeowners take. The old law let homeowners with loans of up to $1 million write off the interest on their mortgages. That amount has now been lowered to $750,000. There will be a grandfather policy for existing loans, so the new law will only apply to new loans. This lower limit could impact the sales of homes ranging between $750,000 to $1 million.
Deductions capped at $10,000
Previously, deductions for income and sales and property taxes were unlimited. Now, the deductions are going to be capped at $10,000. This could affect the South Florida real estate market in a good way.
The new deductions cap could cause residents of states with high property values and state income tax to come to South Florida. This possible boost in South Florida’s population could help offset the expected loss in sales of homes from $750,000 to $1 million mentioned above.
Other issues, like how the bill will impact estate taxes and the disconnect between what the taxpayers expect and what the bill will deliver are less straightforward. It’s most likely that almost every income bracket will get a tax cut for now, despite the new $10,000 cap on deductions. It’s going to take a while for everyone, seasoned real estate professionals included, to get a good grasp on these changes.
Have a specific question about how the tax bill could affect the sale of your home? Give us a call at 305-329-7744. At Drew Kern Real Estate, we are experts in the South Florida market and can help you understand the new law.