It’s now been widely reported – and Rob Dawg agrees – that Congress did not change the two-out-of-five-year requirement for home sellers to receive up to $500,000 in net proceeds, tax-free.
The only two changes in the final tax reform bill are 1) Lowering the mortgage cap from $1,000,000 to $750,000 for future buyers, and 2) capping the state, local, and property taxes deductions to a max of $10,000.
This is a win for the real estate industry, yes? After all, they were considering lowering the cap to $500,000, no SALT deductions, and changing the capital-gains exemption to five-out-of-eight years.
Yet, last night the California Association of Realtors sent out their second email since Friday’s final bill was published, and declared that it ‘Dramatically Weakens Homeownership Incentives’.
Why aren’t realtors forming victory parades, instead of complaining?
Should I just be happy that they stopped including the scare tactic of home values declining if the bill passes?
P.S. It is mortgage principal, not principle.
Now that N.A.R. and C.A.R. have been saying for weeks that home values will be plunging, here’s an example of how it is being reported (H/T to Susie for sending this in from the NYT):
https://www.forbes.com/sites/anthonynitti/2017/12/16/the-tax-bill-is-finalized-whos-happy-and-whos-not/#4fe2ad712288
Exclusion on Sale of Primary Residence
Current Law
A taxpayer who sells his home may exclude up to $250,000 of gain ($500,000 if married filing jointly), provided the taxpayer has owned and used the home as his primary residence for two of the previous five years.
Proposed Law
The final bill retains the current law. This is welcome news to many, because both the House and Senate bills would have extended the ownership and use requirements to five out of eight years, with the House also eliminating the exclusion for high-income taxpayers.
Who’s Happy?
Realtors. And the entire middle class: this is a great step forward for the tax bill, as this is the type of incentive that middle class taxpayers rely on to upgrade their living situations without the imposition of tax.
Who’s Not So Happy?
Once again, there shouldn’t be anyone. This exclusion has universal appeal.
If Rob Dwag says it, it must be true! (I had hope with wording in NY Times article but) *Whew* is all I can say…
Uncertainty kills markets. Seems the usurpers blinked. This time.
Truth told 2of5 is a top quintile benefit. I would accept a 2of5, 3of6, 4of7, 5of8 phase in. Right now those of us with enough properties can cash out three in the span of 50 months. That’s a lot of tax free capital gains.
Always keep in mind these are income taxes not wealth taxes.
I have one property…that I live in. My life changed nearly 15 months ago in ways I didn’t anticipate.
What upset me personally about the home sale provisions in the new tax bill was there would be no chance to make a decision if it immediately went into effect on 12/31/17.
If the two out of five year was to increase to five out of eight immediately then we made the wrong decision as to which home to sell first.
PS Jim,I never listen to what the NAR says. You’re my best source!
Just want to reiterate, I did say that if Trump, a man known around the world as a successful real estate speculator–it’s his self-styled imprimatur, for pete’s sake–had any say in the tax bill, he was NOT going to propose, endorse, support ANYthing that would significantly undermine real estate speculators.
Sausage factory looky-looing seems like time misspent. The “sausage factory” analogy is a fake. It’s not “you don’t want to see how you get your sausage.” It’s designed for us to poke our heads in there. The mess that’s really happening is the slave-trading, and worse, in the alley behind the sausage factory.
In other words, the nasty stuff you aren’t aware of is gonna be stuck in at the last minute, while everyone’s screaming about the undignified death of Miss Piggy. We save Miss Piggy, while the real untoward action is out in the alleyway. By the time we find out about it, them slaves are on a wagon, on their way to Atlanta. And we tell ourselves, “well, you can’t do everything. Hopefully, they’ll be okay,”––as we do. American’s love hope like crack. Never make fun of people hoping. It’s an american pastime that supersedes all other spectator sports.
Anyway, as I said before, I advocate not worrying about what’s gonna happen with real estate law under the Trump administration. Your time would be better spent scouring the internets for clues on Trump’s massive intelligence network based in an ice-cave in Siberia. I know it’s there, because somebody posted a picture of it on Wikileaks, and it doesn’t look photoshopped to me! Follow the ice. Follow the ice…
Uncertainty kills markets. Seems the usurpers blinked. This time.
Agreed – this is a one-off, and the NAR payola must have been considerable to have the 5of8 dropped when both House and Senate had been in agreement to include it. A complete shock that nothing came of it.
A complete shock that nothing came of it.
The more I think about it…..why do they drop it altogether?
Congress could have phased it in or compromised and everyone would be ecstatic.
Follow the money. We (NAR) have spent $32 million this year on lobbying – it has to trickle down. How about $100,000 to everyone who votes for it? A measly $26 million would pass the bill.
Looks like Encinitas is still having trouble identifying their 1600 affordable housing unit locations.
Looks like Encinitas is still having trouble identifying their 1600 affordable housing unit locations.
Too many cooks in the kitchen there, and of course they are trying to spread the 1,600 evenly throughout the city. They’ll be lucky to find a place for 160!
If anyone is still thinking about the tax bill. Q I am trying to figure out. With a cap on SALT of $10k in 2018, it may make sense to accelerate whatever you can into 2017. I saw an article that said they consider accelerating paying SALT as a ‘loophole’ so the tax bill disallows deductions on 2017 return for pre-paying 2018 SALT taxes in 2017. Does this mean paying 2nd installment of prop taxes this year won’t count as a deduction for 2017? If I think I find the answer, I’ll post. If anyone knows, shout it out.
https://www.cnbc.com/2017/12/18/prepaying-2018-state-income-taxes-is-blocked-in-gop-bill.html
I dont know about other jurisdictions but our tax bills come out in Q3 and are due “at least 50%” circa December 10th. I don’t see paying it all before the April second payment date as being prepayment.
Hard to say for CA. Tax year is 7/1/17 to 6/30/18. Two 6-month periods. We all have the bill for the 2018 portion, but the second installment is not “due” until 02/01/18 and delinquent 04/10/18. That being said, as a cash basis taxpayer, I should be able to pay an invoice when presented.
If adequately diversified, Trump seems to be taking care of delivering the stock rally we need, to help realize folk’s earlier anticipated yearly net gain, despite some tax increases here and there. That’s really what his job is. Can’t do it all for everyone. Plus he has a LOT of stuff to unwind from past administrations. Hell of a job.
Would have been nice if he’d gelded the hedge fund traders at least a little. He does have a lot of irons in the fire. Probably didn’t feel up to disturbing the brats.
Speaking of… he just virtually won a war, cleaning up a LOT of Obama’s mess. Not heralded much on CNN, and only quietly lamented in the NYT. Buried in an opinion piece, but they still admitted it. They… admitted… it.
Stock market likes winning wars.
I’m curious as well about pre-paying the second property tax installment before end of calendar year 2017. I went ahead and did it and really hope they don’t block that “loop hole”.
prepayment of income taxs will probably be a no-no, however property taxs should be ok if payment is made and processed such that on your bank account it shouws the check cleared no later than 12-31…to be safe. Nobody is 100% but the tax is due and payable on the bill date, you have option to pay in installments.