Many people have been weighing in on this subject over the last month. I am not a tax accountant, but here are my thoughts:
1) The most important change is that most LLC businesses which have employees (not counting the owner), have a lower tax rate (by 20%) than what we have been paying. This means that if you have some employees, you should be making more take home pay than you are used to. So if for no other reason, this new tax plan should be a great benefit for many of you.
2) Some states with high taxes might have tax payers, especially potential buyers of more expensive homes, making less money. That might impact you if you are in those states and sell to that type of customer. If there is a large migration away from those states, it could impact lower price range homes as well. But, people live where they live typically because of their job, and I don’t see business relocating from New York to Orlando any time soon. I think a slight reduction in average selling price, and therefore square footage is likely in these high tax, high selling price markets.
3) High end homes everywhere (above $1,000,000) may have some owners having their mortgage interest deduction eliminated. This may impact the selling prices/square footages of homes well above this range. For potential customers in the $1.25 million range, for instance, I don’t really see much impacting them, because they will be able to get a mortgage under the new limit and get a second mortgage home equity line for the additional they need. Larger selling price homes, for instance $2,000,000, may have some more impact.
4) Some states with low taxes may see some migration from high tax states. This may increase demands in stares with low or no income taxes, or low real estate taxes, but mostly only for higher priced homes.
5) Normal first time home buyers will probably have some more net income to purchase homes, however this increased buying capacity will probably be offset by the increases we have seen in costs.
Conclusion – If you build in the normal price range, I don’t see a major impact on you from this law, except that if you have employees you are likely to see a tax cut/more take home pay. If you are in the very exclusive range, there may be a negative impact, and if you are in the higher price ranges in high tax states, there may be some negative impact. In general, I think most of us will benefit from these changes.
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