Our Christmas Gift: The Final Tax Reform Package

Our Christmas Gift: The Final Tax Reform Package

Is the new tax package Congress' Christmas gift to us? Compared to what it could have been, I would say yes. Two items of major concern did not make it unscathed through the reconciliation process in Congress. The mortgage interest deduction was proposed to be limited from the current limits of $1.1M to $500k. The compromise only limited the deduction to interest on mortgages up to $750k with existing mortgages as of December 15th being limited to interest on $1M. The other item that did not make it to the final bill was the time period on the capital gains exclusion of up to $500k for married couples and $250k for single filers. The proposed legislation was going to change the requirement of the home being a primary residence to five out of the previous eight years. This change was dropped. The vesting period for the capital gains exclusion on a primary residence has been at two out of the last five years. California homeowners should breathe a sigh of relief. The two important changes with respect to real estate were not as drastic as initially proposed.
 
The mortgage interest deduction ended up not changing much. The new $750k limit is high enough for most California entry-level home buyers to take advantage of the deduction. With regard to the capital gains tax exclusion on the sale of the primary residence, not increasing the vesting requirements is important to all people who are mobile. Millennials had the most to lose if this tax break had changed as proposed. They are the most mobile. Twenty and thirty-somethings tend to go where the job opportunities take them. It will be easier to take their gains and move into another home within a 2-5 year period. That ability to move and put all their gains towards another home would have been affected if that change had been passed.
 
Taxes and tax reform are complex issues. There is no way to make everybody happy. When it comes to taxes, why is anybody happy? Only two real estate-related items out of this major tax reform are addressed here. Tax accountants can and will spend the rest of their lives discussing the details of the entire package. Even though the tax package is disliked by most people, the stock market appears to be reacting positively to it being passed. This should lead to a strong economy. A strong economy is all that is needed to strengthen the California real estate market. Let's get ready for a hot new year, but for now:
 
 
Rodney Smeester
REALTORⓇ
BRE # 01925202
805 453 6000

The December 19th caravan in Santa Ynez Valley had three notable properties to preview. The first home is located at 1978 Honey Locust Court in Solvang. The home is a 3 bed, 2 bath, 2,200 s.f. home. It is listed at $699,000. The second property is in Santa Ynez at 778 North Refugio Road. It is a 3 bed, 2 bath, 1,963 s.f. home on .82 acres. The property has a pool, an artist's studio, and a 2 bedroom guest house. It is listed at $1,500,000.

The last property to mention on the caravan is 3200 & 3201 Caballo Road in Santa Ynez. The 4,600 s.f. home has 5 bedrooms and 4.5 baths. The 20-acre property has tremendous views, a pool, and a second legal residence. It is listed at $3,290,000.

Please contact me if you have any questions, if you would like to see any homes, or if you would like to receive a free market analysis of your home.

For more information, please visit us at Central Coast Landmark Properties.

Work With Us

We pride ourselves in providing personalized solutions that bring our clients closer to their dream properties and enhance their long-term wealth.

Follow Us on Instagram