How the New GOP Tax Bill Affects Homeowners & Commercial Real Estate

As the House and Senate begin voting on the new GOP tax bill today, it’s important to take a look at how this legislation will affect the real estate industry as a whole, but more importantly, our clients and homeowners.

If everything goes as planned, the bill will be on President Trump’s desk for signing come Wednesday with the initial impacts being felt by February 2018.

Given the sweeping nature of this legislation, we’re watching and advising our clients on some key provisions including…

1) Lower Taxes, Increased Take-Home Pay

As a result of lower income tax rates, most Americans will see higher take-home pay since employers are taking out less money from their paychecks.  In theory, this extra cash can be directed towards investments (such as real estate) or used for increased spending.

For a full look at the new brackets and whether or not your taxes will go up in 2018, we encourage you to check out the Washington Post’s Tax Bill Calculator.

2) Decreased Mortgage Interest Deduction

Homeowners, here’s one provision of utmost importance…

Currently, there’s a $1 million threshold for mortgage interest deductions.  The new tax legislation changes this limit to $750K, meaning homeowners can only deduct interest on the first $750K of mortgage debt on a new home.

While this doesn’t affect current homeowners, it does have ramifications for the real estate industry as a whole, especially in expensive cities like San Francisco, New York, and even Miami to some extent.

Experts worry this change could make homeownership less affordable for some people and dissuade homeowners from selling their current properties and trading up to a more expensive home.  For any client questions, Spectrum has mortgage experts on standby to provide advice in this situation.

3) Pass-Through Corporations & Benefits to Commercial Real Estate

For pass-through corporations (commonly known as S-corporations), the new tax bill is a huge win.  Many commercial real estate firms are structured in this manner and stand to benefit significantly.

Under the new tax bill, owners of pass-through entities will be able to deduct the first 20% of their income tax free.

Here’s a closer look at the implications for commercial real estate: