Tax change for homes

Here’s a rundown of how President Donald Trump’s overhaul of the federal tax system could influence the metro Phoenix housing market.

President Donald Trump’s proposed tax overhaul sparked many protests from the housing industry when it was introduced a few months ago. But the plan went through several changes before passing the House and Senate Wednesday.

Here’s a rundown of how the new tax laws may impact metro Phoenix’s housing market:

Prices and sales

House prices and sales could slow because fewer people will buy just to get the mortgage-interest rate deduction, according to the National Association of Realtors.

The industry group’s forecast is based on the nearly doubling of the standard tax deduction to $12,000 for individuals and $24,000 for married couples filing jointly. That may decrease interest in itemizing deductions.

People must itemize to get the mortgage-rate deduction, which lets homeowners deduct the amount they pay in interest on their home loan from their taxable income.

But Arizona housing analyst Mike Orr said the mortgage-interest rate isn’t the main enticement for people to buy homes and doesn’t think higher standard deductions will significantly hurt the Valley’s housing market.

Smaller mortgage deduction allowed

Lowering the mortgage-interest rate deduction from $1 million to $750,000 for homeowners could hurt high-end home sales in the Valley.

But since the median home price is about $250,000 in the Phoenix-area, this change will only impact a small part of the housing market. Nationally, it will impact only about 1.3 percent of mortgages.

Property tax cap

The new $10,000 cap on property tax write-offs could also work to slow sales, say real estate experts.

This one won’t be a big issue for the Phoenix area like it will East and West coast housing markets, where home prices are much higher. The average property tax bill in Maricopa County is below $3,000.

Home-equity loan write-off goes away

Fewer homeowners might be enticed to spend money on home renovations because interest paid on home-equity loans is no longer deductible.

Now, homeowners can deduct interest for home equity loans up to $100,000, but that goes away next year.

No capital gain change on sales

A proposed change to the capital gains exemption for people who sell homes was taken out of the tax-reform package.

Individuals are still allowed an exemption of up to $250,000 and couples $500,000 from the profits of a home sale, if they lived in a house for two of the past five years.