The Committee that reconciled the House and Senate tax reform bills eased up on a couple elements that could have been bad towards real estate. This bill has to be passed by both the Senate and House in it’s as is condition, before it can be submitted to President Trump for his signature.
A Quick breakdown on a few provisions applicable to real estate:
1) Capital Gain principle residence exemption contains no modification from existing tax law (a good thing). Stays must be owner occupied 2 out of 5 years. $250K gains exemption ($500K married). Both Senate and House bills individually had a modification to make it owner occupied 5 out of 8 years, so this reconciled bill is avoiding a major negative.
2) Mortgage Interest Deduction will be limited to $375K for single, $750K married. No more second home. No more home equity line. In the case of acquisition indebtedness incurred before December 15, 2017162 this limitation is $1,000,000 ($500,000 in the case of married taxpayers filing separately).163 For taxable years beginning after December 31, 2025, a taxpayer may treat up to $1,000,000 ($500,000 in the case of married taxpayers filing separately) of indebtedness as acquisition indebtedness, regardless of when the indebtedness was incurred.
3) Property tax and state and local taxes limited to $10K deduction.
4) 1031 Exchanges limited to real estate only. No more “other business property and equipment” can be exchanges within 1031 parameters
Again, this is not yet law, but the powers that be are trying to get this passed asap. Any personal specific questions, speak to your CPA.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me.
Ron Henderson GRI, RECS, CIAS
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals
BRE #00905793 NMLS #310358
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth