Last year's tax reform bill notably featured limitations on the deductibility of mortgages and state and local taxes, which would hit hardest places like Encinitas with high state taxes and high property values.
Nevertheless, many Encinitans are finding that their taxes will be reduced overall this year due to the accompanying lower tax rates and higher standard deduction and child credits. The Tax Foundation has an excellent calculator here where you can estimate the impact of tax reform on your personal situation. Even in high-tax, high-property-value Encinitas, most people will probably see their taxes reduced.
However, even those who receive significant tax cuts will see the marginal benefit of home ownership reduced. Here's a look at the math for a $986,000 (recent median Encinitas sale price from Zillow) house. With a 20% down payment, tax reform raises the monthly after-tax cost of home ownership from $3,592 to $4,326.
To see how tax reform affects the cost of ownership of your house, go to the Google spreadsheet and select File > Make a copy, and then put in your own numbers (note: there are simplifying assumptions and perhaps some technical errors, but the big picture doesn't change).
Will this affect the real estate market? It's a pretty big change in the cost of ownership.
UPDATE: For buyers who were previously in the Alternative Minimum Tax, the change may be more in the range of $450/month.
Many of the density bonus market rate housing sold for more than a million dollars. What is an extra $8,400 to them - peanuts?
ReplyDeleteThose tract McMansions often come with low down payment variable-rate mortgages and the innocent buyers often borrow even more for upgrades and landscaping. It's not peanuts, it's more of a shell game. When the rates go up and the economy goes down there could be foreclosures.
DeleteHow would adding a legal grannyflat work into the equation?
ReplyDeleteYou would end up having the same impact on the community as a duplex.
DeleteThe ADU discussion is going to RUIN the CITY. Coming soon.... no on street parking and obnoxious short term vacation rentals.
Be careful what you wish for.... I guess.
DeleteI don't believe that this will have too much of an impact on short term values. The mortgage interest deduction is already limited to loans of less than $1m, so the $2+M home segment has already factored this in years ago. Most of the home purchases in Encinitas are trade up transactions, so many buyers are coming in with substantial equity and low loan-to-value ratios. Looking at IRS filing data for the area, most Encinitas taxpayers are already phased out on their itemized deductions, so they're not getting the full benefit already. The house flippers and investment buyers (and there are a lot more of those today) don't have to deal with this issue at all since their interest is fully deductible.
ReplyDeleteWhat is far more damaging is the elimination of the state tax itemized deduction. Encinitan's make a lot of money and the loss of that deduction hurts way more than limiting the interest deduction to $10K.
- The Sculpin
.........cue the trolls........
Oh yeah? Well the City Manager and all staff needs to be fired because they're incompetent. The City Council needs to go because they're corrupt and don't represent my values anymore. And there's too many establishes serving alcohol, which has turned our quaint town into Pacific Beach north. rabble, rabble, rabble!!!
Delete.......cue the trolls.... you've already spoken.
Deletetldr
DeleteWithout new candidates to replace the current office holders we are stuck with what we have. I have not heard of any new potential city council candidates yet, but would love to have that option in November. Anyone, anyone?
ReplyDeleteWC sorry to change the topic but, anyone whom wants to see the city ban bullhorns at our public events needs to let the city know. They are now reviewing the process to ban bullhorns but this will take time.
ReplyDeleteThe more of us that speak up and email them or speak before council in the 3 minute allotted time at the beginning of the council meetings, maybe we can speed up the review process. They need to hear from as many of us as we can muster and asap. Enough is more than enough of such behavior being allowed. They are free to parade around all they want with their signs. The use bullhorns needs to to be banned yesterday. Email the city and we maybe can speed up the process.
Can you really ban them?
DeleteWhat happens if someone has a disability and needs a bullhorn to speak?
A bullhorn IS a disability.
DeleteFreedom of speech allows this group to parade around with their signs all they want. Using bullhorns to scream out their message has nothing to do with freedom of speech. That use is disturbing the peace of people who come to our city's public events and should be banned from now on.
ReplyDelete9:21pm. Just who needs a loud bullhorn to converse with others? That would be a rather one sided conversation in anyones book. You are pulling that out of your rear end. If a disabled person needs to amplify their voice to the degree where they need a bullhorn, I cannot imagine such. You apparently can.