Photo: Robert Clark
The Tax Cuts and Jobs Act makes many changes to existing laws that diminish some of the tax benefits of owning a home.
But despite the changes, 54 percent of New York homebuyers say that the new tax laws have no impact on their homeownership plans, according to a report released today by the listing site ApartmentList.
Some real estate experts have estimated that tax reform could cost some New York homeowners in excess of $30,000 over the life of a 30-year mortgage.
One of the most significant changes to the tax code is the doubling of standard deductions. Fewer homeowners are now likely to itemize their annual filings. Also significant to homeowners is the capping of deductions for state and local taxes — including property taxes — at $10,000.
Experts claim that these changes will negatively impact many homeowners in hot West Coast markets and the Northeast the most, potentially costing homeowners thousands of dollars annually.
Nationally, some 57 percent of potential homebuyers have not altered their plans due to tax reform but 26 percent say that they now plan to delay their plans. Additionally, 13 percent expect to have a lower tax bill and plan to use the potential savings to buy a home sooner than originally planned.
And in New York State — a state expected to be “hit hard” by tax reform, says ApartmentList — over half of potential homebuyers say that tax reform will have “no impact” on their homeownership plans. But about a third say that their plans have been “negatively impacted” by tax reform.
“It is slightly surprising that a majority of respondents in a hard hit area such as New York report no impact, but I think it speaks to the fact that there are many factors in the decision, and these losses may not be enough to sway people’s decisions,” ApartmentList Housing Economist Chris Salviati tells BuzzBuzzNews.
At the state level, in counties where tax reform changes are “expected to hit the hardest,” nearly 20 percent of potential homeowners are now planning to buy in a different state due to tax reform.
There are several reasons why some homeowners may not be reporting an impact.
First, they may not understand the tax reform changes. Further, for buyers that view homeownership as more of a “long-term” goal, they may not have “thought through” the impact.
Second, tax reform will have a minimal effect on homeowners of lower priced (“starter”) homes who would generally take the standard deduction on their taxes. These homeowners “don’t receive the tax benefits of homeownership,” says ApartmentList.
Lastly, the decision to buy a home is a complicated one made up of financial and lifestyle considerations. And according to ApartmentList, “the magnitude of lost tax benefits may not be large enough to swing the needle on this decision” toward buying.
“Personal preferences also play a big role, including how long you plan to stay in a home and what your preferences are around being able to customize your space and handle maintenance issues,” says Salviati.
ApartmentList gathered its data from a survey it conducted between February 3rd and March 4th, 2018.
Click here to read the entire release.