So is it really true? Will the new tax bill that put caps on mortgage interest and property taxes stop people from buying a home? Will it prevent them from receiving numerous tax deductions?
Well, according to the IRS, the caps on these areas will only affect four percent of the nation.
Now, while I’m sure, many (including me) question this number, their next projection might be more accurate:
In high state areas like New York this will effect over 60 percent of home ownership.
“Capping” deductible areas like mortgage interest and property taxes are designed to shift you from being an itemized deductible to a standard deductible user.
That means over 60 percent of New Yorkers will get hit with a double whammy. While they will receive a general three percent tax cut on their income, they will also lose at least two very valuable once deductible areas.
The result is a much lower 2019 income tax refund.
So what can one do? Luckily, since the tax bill does not take effect on tax refunds until January of 2019 (for 2018 returns) you have one year to prepare, to learn, to teach yourself the new tax code. You’ll learn how to maintain a higher tax refund while losing your precious deductions. Talk to your tax adviser about it.
Will the new tax bill make consumers think not to buy a home? We doubt it! We believe the aspiration of a greater quality of life and lower interest rates for mortgages will continue to allow for a boom in home ownership.
The bigger danger is this false sense that the notion of doubling the standard deduction will make up for the loss for now non-deductible areas, like mortgage interest, property taxes, city and state taxes, job expenses, exemptions (dependents), advisory fees, and many other reduced areas of destructibility, which at a prior time would very easily allow you to itemize your deductions.
So while home owners in New York will receive a three percent tax cut (like everyone else), because of high tax state policies, there best bet could be a tax increase instead.
So, now that the federal government has spoken, maybe it’s time for New York State to talk. Hope Governor Andrew Cuomo and state government will “transfer” the loss of federal deductions into the state tax code to make up the loss.
But even if they do not, who is going to stop buying a home with long-term mortgage rates as low as three percent? Don’t believe me, ask your mom or dad! Thirty years ago, they were probably paying ten percent or more for a mortgage.
Buy a home! Improve your quality of life at the cheapest rate in four decades! But consider asking your state representative to rework the state tax code. Every little bit helps to save, spend or reinvest!
Anthony Rivieccio is the founder and CEO of The Financial Advisors Group, celebrating its 20th year as a fee-only financial planning firm specializing in solving financial problems. Mr. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Klipingers Personal Finance, The New York Post, News12 The Bronx, Bloomberg News Radio, BronxNet, the Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Bronx News, and The Bronx Chronicle. Mr Rivieccio is also currently an adjunct professor of Business & Personal Finance for City University of New York and Monroe College, a private university. For financial assistance or a FREE 2017 Income Tax Analysis. Anthony can be reached at 347.575.5045