The recently passed Tax Cuts and Jobs Act of 2017 makes significant changes to tax benefits for homeowners, including decreasing the limit on borrowing subject to the mortgage interest deduction from $1 million to $750,000, and capping deductions for both state and local taxes at $10,000.
In a recent report, Apartment List analyzed how these changes will impact potential homebuyers in different parts of the country. Of the potential homebuyers who responded to the survey, 56 percent said that the tax reform has no impact on their plans to buy a home.
The report also found that changes would be most drastic in coastal cities that possess both high real estate values and high local tax rates, prompting less favorable views of the reform in those counties.
In counties that are negatively impacted, 18 percent of potential buyers report that they now plan on buying a home in a different state — which is double the percentage of homebuyers in other counties who plan on buying out-of-state due to the tax code.
The survey reported that 15 percent of potential buyers expect to have a lower tax bill and plan to use the savings to buy a home sooner than they would have before the tax cuts. In negatively impacted counties, 10 percent of potential buyers plan to use their anticipated savings to buy a home sooner.
Of those who do report that the reform will impact their decision to buy a home, political affiliation seems to correlate with how the homebuyer interprets the tax cut’s effects.
The survey found that 38 percent of Democratic potential homebuyers say the tax cuts have negatively impacted their homeownership plans, while only 12 percent report a positive impact.
On the other side of the aisle, 32 percent of Republican potential homebuyers say the tax cuts have positively impacted their homeownership plans, while only 10 percent report a negative impact.
In the city of Chicago, 16 percent of survey responders said the tax codes positively impacted their homeownership plans, while 23 percent say their plans were negatively impacted. On the other hand, 61 percent say that the codes had no impact on their plans to buy a home.