Tax Reform & Housing: A Reference Guide

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Disclaimer: This guide is not meant to be a resource for tax advice but instead a resource for basic information concerning only certain aspects of the new tax code and how they may impact the real estate market. You should get tax advice from your accountant or tax preparer who will explain how the entire tax code will affect your personal return.

This information comes immediately after the new tax code became law. Some of the information may be revised as the analysis of the new law evolves.

When the tax code was originally being overhauled by the House and the Senate, there were three major proposals being considered that would have substantially impacted the residential real estate market:

  • Changing the requirements for the exclusion of gain on the sale of a principal residence
  • The reduction on the limit of the Mortgage Interest Deduction (MID)
  • The elimination of the State and Local Tax deduction (SALT) which includes property taxes

Let’s look how the tax code has evolved from the original proposal, and decipher what impact experts believe it may have on the housing market.

1. Exclusion of gain on sale of a principal residence

Original Proposal: Owners would need to live in their house for at least 5 out of the last 8 years to claim this exemption. Under the former tax framework, a typical owner, who has lived in their house for at least 2 years out of the last 5 years, would be able to exclude the first $250,000 of gains if filing single or the first $500,000 if filing jointly.

The New Tax Code: No change. The “at least 2 years out of the last 5 years” requirement is unchanged.

Impact on the Market: None.

2. Mortgage Interest Deduction

Original Proposal: Reduce the limit on the mortgage interest deduction (MID) amount from $1,000,000 to $500,000.

The New Tax Code: Reduces limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans up to $1 million are grandfathered.

Impact on the Market: Assuming a 20% down payment, this reduction in the MID will impact buyers that are purchasing a home between the prices of $938,000 and $1,250,000. Any home under the lower price is still covered and any home over the higher price was not covered under the former tax code either.

What does that mean to the market? Experts disagree. Calculated Risk’s Bill McBride:

“I think the impact of reducing the MID from a maximum of $1 million in mortgage debt to $750 thousand in mortgage debt will have very little impact on the housing market.”

On the other hand, Capital Economics claims:

“The impact on expensive homes could be detrimental, with a limit on the mortgage interest deduction raising taxes for those that itemize.”

3. State and Local Taxes (SALT)

Original Proposal: The elimination of the state and local tax deduction (which includes property taxes).

The New Tax Code: Allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes.

Impact on the Market: Most experts agree that higher taxed regions will be impacted as homeowners in those communities now have a cap on these deductions.

Calculated Risk’s Bill McBride stated:

“SALT will have an impact on housing in some areas. Some people might choose to live in one state over another (if they have a choice), based on taxation. This could impact demand in certain states – especially for the middle and upper-middle class homeowners.”

Mark Zandi of Moody’s Analytics said:

“The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizers, and where homeowners have big mortgages and property tax bills.”

What will be the overall impact on the housing market?

For most of the country, the new tax code will not have a negative impact on the market. As Capital Economics reports:

“Given most households will see an overall tax cut, and potential buyers are likely to put that saving towards their home, we doubt it will have a significant detrimental impact on the housing market.”

There is also no doubt that some higher priced, higher taxed regions will be affected more than others. However, most experts agree that other portions of the tax code will favor the high-end buyer and seller, and this might mitigate many concerns. McBride explains:

“The corporate tax cuts (and other tax cuts) will mostly benefit the wealthy, and this will be a positive for high end real estate.”

What does this all mean to you?

To know for sure, you should sit with your accountant or financial planner and explore how all the aspects of the new code will impact your family.

Most families consider homeownership an essential part of the American Dream, and don’t purchase a home based solely on the tax advantages. The main reasons they buy a home are personal (they just got married, they are looking for a good place to raise children, they want to be near friends and family, they want to better enjoy their retirement, etc.). This will never change.

Looking at the new tax code, Mr. McBride’s opinion makes the most sense:

“There will be some negative impact based on SALT, but overall the impact of these policy changes on housing will be minimal.”


The #1 Reason to Sell Now Before Spring

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The price of any item (including residential real estate) is determined by ‘supply and demand.’ If many people are looking to buy an item and the supply of that item is limited, the price of that item increases.

According to the National Association of Realtors (NAR), the supply of homes for sale dramatically increases every spring. As an example, here is what happened to housing inventory at the beginning of 2017:

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Putting your home on the market now instead of waiting for increased competition in the spring might make a lot of sense.

Bottom Line

Buyers in the market during the winter months are truly motivated purchasers. They want to buy now. With limited inventory currently available in most markets, sellers are in a great position to negotiate.

Let Collins Family & Associates help you SELL YOUR HOME NOW BEFORE SPRING!


2 Ways to Get the Most Money from The Sale of Your Home

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Every homeowner wants to make sure they maximize their financial reward when selling their home. But how do you guarantee that you receive the maximum value for your house?

Here are two keys to ensure that you get the highest price possible.

1. Price it a LITTLE LOW 

This may seem counter intuitive, but let’s look at this concept for a moment. Many homeowners think that pricing their homes a little OVER market value will leave them with room for negotiation. In actuality, this just dramatically lessens the demand for your house (see chart below).

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Instead of the seller trying to ‘win’ the negotiation with one buyer, they should price it so that demand for the home is maximized. By doing this, the seller will not be fighting with a buyer over the price but will instead have multiple buyers fighting with each other over the house. gives this advice:

“Aim to price your property at or just slightly below the going rate. Today’s buyers are highly informed, so if they sense they’re getting a deal, they’re likely to bid up a property that’s slightly underpriced, especially in areas with low inventory.”

2. Use a Real Estate Professional

This, too, may seem counterintuitive. The seller may think they would make more money if they didn’t have to pay a real estate commission. With this being said, studies have shown that homes typically sell for more money when handled by a real estate professional.

study by Collateral Analytics, reveals that FSBOs don’t actually save any money, and in some cases may be costing themselves more, by not listing with an agent.

In the study, they analyzed home sales in a variety of markets in 2016 and the first half of 2017. The data showed that:

“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.”

The results of the study showed that the differential in selling prices for FSBOs when compared to MLS sales of similar properties is about 5.5%. Sales in 2017 suggest the average price was near 6% lower for FSBO sales of similar properties.

Bottom Line

Price your house at or slightly below the current market value and hire a professional. This will guarantee that you maximize the price you get for your house.


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Should you move after the loss of a spouse? Here’s what you need to know…

Should You Move After the Loss of a Spouse? Here’s What You Need to Know

Article by:   Lucille Rosetti


The urge to pull up stakes and find new stomping grounds is common among people who have lost a spouse or other loved one. But is it wise to move after the impact of such a traumatic life event? For some people, the answer is “yes.” Relocating can provide a number of powerful psychological benefits, as long as the move is well-planned and thought out. Consider these factors when making this all-important decision.


When to Stay Put


While fresh surroundings can indeed offer a new lease on life for many, it’s nevertheless important to avoid making major decisions immediately after your loss, according to experts at the University of Minnesota. This is true for the following reasons:


  • Grief brings with it a number of conflicting emotions. The emotional war going on inside the mourner makes rational decisions extremely difficult, at least until the shock of the loss fades away.
  • Decision-making, by its very nature, is mentally draining. There is no worst time to make big choices than when your mental energies are at a low ebb.
  • The emotional vulnerability that follows a loss can hinder your ability to look out for your own interests. Selling your home and moving can become problematic if you act in haste.


For these reasons, we recommend taking time to think things out thoroughly before deciding what you should do. If, in the end, you choose to relocate, then here are some tips to help you in the process:


  • Sorting through your belongings and deciding what to keep and what to get rid of is taxing during even the best of times. For this reason, you should consider hiring a professional packing and moving service. A third-party can provide much needed objectivity while sparing you the physical and emotional turmoil of going through your possessions. Moving companies vary in terms of costs and services offered, so we recommend checking with several businesses before settling on one.
  • If you prefer to do the packing and moving yourself, then enlist the help of a trusted friend or family member to help you with the process. If you find yourself unable to bear the idea of throwing away your loved one’s items, then consider keeping a handful of them and donating the rest to a worthy cause. This is a great way to honor the person’s memory while sparing yourself from needless agonizing.
  • Remember that some items require special care to avoid damaging them. One example is framed artwork, as pointed out by The Spruce. On the other hand, some products, like canned food, are best given away unless your new home is very close to your old one. Likewise, appliances are often too large or awkward to fit easily in a new location. You’ll find ready buyers for items like stoves and refrigerators by checking Craigslist and similar websites.


Coping with the Emotions of Moving


Relocating is stressful even during the happiest of times. Here’s how to minimize the stress of the experience:


  • Start as far in advance of moving day as possible. This will spare you from the hassles of last minute preparations.
  • Save the items you use the most to pack last. For example, do you have a favorite reading chair? Wait until moving day to get it ready for your new home.
  • Take time to say goodbye to friends, relatives and neighbors. This will help you to have a sense of closure as you move on.


Only you can decide if moving is right for you. Take time to make an informed decision and avoid any pitfalls that may come your way.



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Create Your Dream Home in Point Loma!

6 bedroom 4.5 bath over 6000 square feet with spectacular views of City lights, San Diego Bay, Ocean, Coronado Islands and far as the eye can see!

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