Note: This is not tax advice. Do your own Due Diligence. I don't discuss politics. Consult a tax professional for any of your questions. This is purely my interpretation and my thoughts with regard to the 2018 GOP Tax Reform with how it relates to real estate. Thanks for watching! Snapchat/Instagram: GPStephan
Notable Changes:
The mortgage interest deduction. It was previously capped at $1,000,000, which means you can deduct the interest on the first $1,000,000 of your mortgage. This deduction is now lowered to $750,000 for any new home purchases. This means that any interest you pay above a $750,000 is not tax deductible.
For most of the US, this doesn’t make a difference at all. The median US home price is about $258,000. This impacts high cost of living areas with home prices above $800,000 or so, but even that impact is very minimal in terms of an interest deduction…and most likely that person will end up saving money in other areas to make up for that deduction.
The next big change is the limit on property tax and state deductions (SALT). In relation to real estate exclusively, this means that your property tax deduction is capped at $10,000 per year, instead of being unlimited like it was prior. And like I said, this doesn’t impact the majority of the United States where housing is all under $800,000.
The next is that it appears as though home equity and HELOC loans are not tax deductible on a primary residence.
A positive for real estate is a shortened depreciation schedule. In commercial real estate, you used to be able to depreciate the property over 39 years, and in residential it’s 27.5 years. This was shortened to 25 years for both.
They didn’t get rid of the provision of capital gains exclusion on a primary residence. If you’ve lived in your house for 2 of the last 5 years, you can exclude paying taxes on the first $250,000 if you’re single and $500,000 if you’re married.
For rental properties, this makes them MUCH more attractive in comparison to buying a primary residence, but ONLY if that primary residence is over $850,000 or so. If your house is worth under about $850,000 or so, the tax plan really has no affect on you, other than not deducting a HELOC or home equity line of credit. For rental properties, nothing has changed and you can now depreciate them 2.5 years faster than before.
For a home owner buying a home above $1 million dollars or so, it got more expensive. The property tax deduction was a great deduction for people in the high price range. However, my thought is that even though housing becomes a little more expensive, I don’t think people in this price point will be deterred from buying because of a marginal savings in whatever they were writing off.
Frankly, depending on the industry, you should be overall saving more money, so this should entirely balance out, if not come in your favor. So those are my thoughts. I don’t want to turn this into a political video, I stay out of that, I’m not picking sides, but it is what it is and I’ll report on the changes and what I think this means for prices. Also, keep in mind I’m not a tax consultant and you’ll need to consult with a specialist since taxes are such a personal matter. This is not legal or tax advice. Do your own due diligence.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness @gmail.com
Suggested reading:
The Millionaire Real Estate Agent: http://goo.gl/TPTSVC
Your money or your life: https://goo.gl/fmlaJR
The Millionaire Real Estate Investor: https://goo.gl/sV9xtl
How to Win Friends and Influence People: https://goo.gl/1f3Meq
Think and grow rich: https://goo.gl/SSKlyu
Awaken the giant within: https://goo.gl/niIAEI
The Book on Rental Property Investing: https://goo.gl/qtJqFq
Favorite Credit Cards:
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American Express Platinum - https://goo.gl/C9n4e3

By Stock Chat

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25 thoughts on “2018 gop tax reform vs. how this impacts real estate prices”
  1. Avataaar/Circle Created with python_avatars Mike D says:

    Hmmmm almost like the GOP made it tougher to be a republican in a democratic state……
    From my understanding it is Property Taxes + (State Income OR Sales Tax).
    Not hard to be impacted by the cap if you are in a blue state (and itemize). It impacts me and my house is nowhere near $1 million
    Thanks GOP!
    No hate Graham, thanks for the video!

  2. Avataaar/Circle Created with python_avatars Negar Aref says:

    Graham thanks for the great video. One question thoug, you said the 10k SALT limit doesn't apply to investment properties. Is that true even if the properties are directly under one's name (no LLC or S-corp)?

  3. Avataaar/Circle Created with python_avatars blues man says:

    You get it paying 10k a year in TAXES?… for real.. States have become total crooks and
    are robbing our hard earned money with property taxes. Wait until you retire that SS check
    you get will disappear. States have become the new landlord and YOU"LL NEVER OWN.

  4. Avataaar/Circle Created with python_avatars Troy Knows says:

    i SMASHED the like button and i messed up my expensive phone

  5. Avataaar/Circle Created with python_avatars A R says:

    $500 to $1,000 per month more in taxes. Up to $12,000 a year or more for a middle class family is a lot. All for what? So Apple/big pharma/oil/Wells Fargo can get an extra tax break?

    In high property tax states people buy homes together with their families. They aren’t rich, they may be a father and grandfather pitching in to buy that expensive house together. They could be siblings buying together. Now they can’t afford it. But Apple made an extra couple pennies on its stock. I swear this president is so bad.

  6. Avataaar/Circle Created with python_avatars Aymen Ruko says:

    I hate those fucking taxés

  7. Avataaar/Circle Created with python_avatars 65MMREHP says:

    Do you have a video on tax deductions for real estate professional individuals with the new tax law?

  8. Avataaar/Circle Created with python_avatars Saif Al-Badri says:

    Great video thanks bro

  9. Avataaar/Circle Created with python_avatars HP says:

    I live in Orange County NY and a house for 600k has a property tax of 20k

  10. Avataaar/Circle Created with python_avatars W M C says:

    Very helpful as a start for learning more, to prepare for sitting down with my tax guy, to see if he's got it right.

  11. Avataaar/Circle Created with python_avatars 404trucker LLC says:

    someone who can afford a $1m home not going to miss that deduction. however, he or she can purchase that property in a holding company and lease that house back to themselves or lease it from someone in a business and take that home deduction on the schedule c.

  12. Avataaar/Circle Created with python_avatars michael says:

    Damn Trump just increased taxes for states that didn't vote for him what a Savage 😂😂

  13. Avataaar/Circle Created with python_avatars robertoospina10 says:

    Love the new young generation taking over the old hats!!! This is some damn good stuff!

  14. Avataaar/Circle Created with python_avatars Bruno Feges says:

    To save you the trouble with disclosures, you can edit in a banner with legal disclosure any part of the video where you're giving a recommendation. Thanks for the advice btw, not sure why you do it, but it benefits me a lot.

  15. Avataaar/Circle Created with python_avatars cupcake man says:

    for the majority or all of Trump support areas, the reduced mortgage interest tax deduction and property tax deduction will not affect them.

  16. Avataaar/Circle Created with python_avatars karen Liu says:

    Does the cap include capital gains on stocks and prifit from housing? It would seem really low and cause people in hight tax states to move…Thanks for the video…

  17. Avataaar/Circle Created with python_avatars Fatimoh Jinadu says:

    Great job.

  18. Avataaar/Circle Created with python_avatars C F says:

    GREAT video Graham, thanks so much for taking the time on it for us. I won’t quote you on this as you are not a tax professional, but from what you understand, is a HELOC on a property that is owner occupied since 2010… is that interest you ax deductible?

  19. Avataaar/Circle Created with python_avatars Drew S says:

    Fantastic video, but you forgot the standard deduction and exemption re-work.

    Before you had to hurdle over $12.6k Standard Deduction to Net a benefit. Now you have to hurdle over $24k (married) — That's $11,400 * marginal rate that no longer is gained by owning a house.

    That's another $237.5 a month.

    You're pushing $500 a month difference for high end houses with higher SALT. That's pretty huge. Compound that with rising rates and lack of supply driving up prices — We're in the bubble and this plan is absolutely going to be a negative influence.

  20. Avataaar/Circle Created with python_avatars yourbeautybff says:

    You said it yourself….it’s $10,000 total for SALT. That is state income tax and property tax COMBINED. I payed almost $10,000 just in state income tax here in CA last year. You said it only effects people buying homes over approx. $800,000? Not true. Because I pay so much state income tax already it means if I buy a house I can’t write off ANY of my property taxes which in CA are $600 a month MINIMUM. That’s a huge deduction loss with new tax law for us in high cost housing areas who already pay a ton in state income tax.

  21. Avataaar/Circle Created with python_avatars Kiancool says:

    Thank you for the comments Graham. You brought up some points about the tax plan. However, I think there are a couple problems with the calculations that aren't trivial. The first is that many people buying $1M+ homes have higher marginal tax rate like 35%. Also, my understanding of the SALT deduction is that the $10k limit includes STATE taxes! Almost everyone buying $1M + homes will have at least $10k in STATE taxes anyway and therefore they will pay ALL their property taxes with no tax deduction. Therefore, in your example of $13k in property taxes, the savings at a marginal rate of 35% would cost an extra $4k per year. Much higher than your estimation. Furthermore, the doubling of the standard deduction becomes VERY significant for homes that are less expensive. With interest rates between 3-4%, a $500k loan costs about $1k in interest per month or 12k per year. How many people will be able to deduct any of this significantly if the standard deduction is $24k for married filing jointly? I think it can ultimately effect all price points up to $2M. It also becomes a problem for first time homebuyers. A significant portion of first time homebuyers may be getting their down payments from their boomer parent's HELOCs but now those are not tax deductible. This will effect total available to put down. I think once people realize how this effects them, prices will adjust down.

  22. Avataaar/Circle Created with python_avatars aware24 says:

    There is no 25% bracket anymore, most people would fall under 22 or 24 percent tax bracket vs. the previous 25 and 28 tax brackets. So you get less mortgage tax benefits it would seem due to modified tax brackets. Do I have this right?

  23. Avataaar/Circle Created with python_avatars Ben Pulen says:

    hey graham, what kind of business do you have s corp or llc …?

  24. Avataaar/Circle Created with python_avatars ming lee says:

    Single house with renovation and near c-train for Kingsland,Calgary, Canada is around CAD $ 600,000 in southwest inner city area compare to nearby area which is around CAD $ 700,000.

  25. Avataaar/Circle Created with python_avatars Graham Stephan says:

    Just a quick note here – this video is not meant to be political whatsoever. Just covering the new tax changes with how this relates to real estate 🙂

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