Real Estate in Palm Springs to screechingly halt!?
Taxes, property tax deductions ,caps on interest and steadily creeping up interest rates!!!Reasons enough that could slowly but surely bring the Real Estate in smaller sub-markets , like Palm Springs, to a near stop!
Interest rates-for 30 years loans-before and now
Before! Interest rates a few years ago were at their all time low! It was not unusual to see rates in their 3%s . Not the case anymore though ! The Fed has been hiking its rates for some time now. Now! The latest and most recent hike brought the interest rate to %5. And that is the interest that the Fed gives to the Banks.From there and on the Lender Banks-B of A, Chase, Wells Fargo and so on ,add their profit and as a result You may end up well above 5% and in the high 5%.
Property Tax Deductions-before and now
Before! The Tax Cuts and Jobs Act (TCJA) trimmed two important tax breaks for homeowners.Under prior law (before the TCJA), people could claim an itemized deduction for an unlimited amount of personal (non-business) state and local income and property taxes on Schedule A of Form 1040. So if you had a big property tax bill, you could deduct the whole thing if you itemized. Individuals with big personal state and local income tax bills could fully deduct those too on Schedule A, if they itemized. One had the option of deducting personal state and local general sales taxes on Schedule A instead of state and local income taxes (helps if you owe little or nothing for state and local income taxes). Now! For 2018-2025, the TCJA changes the deal by limiting itemized deductions for personal state and local property taxes and personal state and local income taxes (or sales taxes if you choose that option) to a combined total of only $10,000 . No deductions are allowed whatsoever for foreign country purchases, let`s say U have real estate in Mexico or Canada!These TCJA changes unfavorably affect individuals that own a more expensive home or own a second /3rd/4th home,let`s say for rental purposes.These individuals can now deduct a maximum $10,000 of personal state and local property taxes — even if they deduct nothing for personal state and local income taxes or general sales taxes.
What`s the good news as far as taxes?
The TCJA kept one very important deduction though. The one that allows you to potentially exclude from federal income tax up to $250,000 of gain from a qualified home sale, $500,000 if you are a married joint-filer.The example is if You bought a house for $200,000 and after 2 years sold it for $450,000 .
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