The federal government has long encouraged owning a home over renting. Housing subsidies in the tax code effectively lower the after-tax cost of homeownership, which has helped taxpayers move out of residential rentals and into their own homes. The Jeffersons might not have credited tax policy for it in their 1970’s sitcom, but it has assisted taxpayers in “moving up” to bigger and better homes. The Tax Cuts and Jobs Act of 2017 (TCJA) makes sweeping changes to the tax code for individual taxpayers that directly impact their ability to transition from renting to owning their home.
About 34 million households, or 44 percent of U.S. homes, carry a mortgage with annual interest charges that exceeded the prior standard deduction. With the new standard deduction, that group shrinks to around 14 million, or 15 percent of U.S. households, according to the National Association of Realtors (NAR).
And while the TCJA nearly doubles the standard deduction, it caps the deduction for state and local taxes — including income, sales, and property taxes — at $10,000 for both single and married taxpayers. This one-two punch could significantly impair some taxpayers’ appetite for homeownership.
The Tax Cuts and Jobs Act is the most monumental tax change in 30 years. What does it mean for multifamily?
The Tax Cuts and Jobs Act (TCJA) was signed into law on Dec. 22, 2017. This sweeping tax reform is the most monumental tax change in 30 years and will have an impact on the single-family and multifamily housing markets.
The TCJA widens the individual tax brackets while lowering the top tax bracket from 39.6 percent to 37 percent and maintaining the bottom tax rate at 10 percent.
Pre-TCJA, taxpayers could claim a personal exemption of $4,050 for themselves, their spouse and each dependent. The TCJA suspends all personal exemptions. The standard deduction is increased from $12,000 to $24,000 for families, and the child tax credit is increased from $1,000 to $2,000.
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