Tax Reform & Housing: A Reference Guide

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Disclaimer: This guide is not meant to be a resource for tax advice but instead a resource for basic information concerning only certain aspects of the new tax code and how they may impact the real estate market. You should get tax advice from your accountant or tax preparer who will explain how the entire tax code will affect your personal return.This information comes immediately after the new tax code became law. Some of the information may be revised as the analysis of the new law evolves.

When the tax code was originally being overhauled by the House and the Senate, there were three major proposals being considered that would have substantially impacted the residential real estate market:

  • Changing the requirements for the exclusion of gain on the sale of a principal residence
  • The reduction on the limit of the Mortgage Interest Deduction (MID)
  • The elimination of the State and Local Tax deduction (SALT) which includes property taxes

Let’s look how the tax code has evolved from the original proposal, and decipher what impact experts believe it may have on the housing market.

1. Exclusion of gain on sale of a principal residence

Original Proposal: Owners would need to live in their house for at least 5 out of the last 8 years to claim this exemption. Under the former tax framework, a typical owner, who has lived in their house for at least 2 years out of the last 5 years, would pay nothing in capital gain taxes if they sell the house.

The New Tax Code: No change. The “at least 2 years out of the last 5 years” requirement is unchanged.

Impact on the Market: None.

2. Mortgage Interest Deduction

Original Proposal: Reduce the limit on the mortgage interest deduction (MID) amount from $1,000,000 to $500,000.

The New Tax Code: Reduces limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans up to $1 million are grandfathered.

Impact on the Market: Assuming a 20% down payment, this reduction in the MID will impact buyers that are purchasing a home between the prices of $938,000 and $1,250,000. Any home under the lower price is still covered and any home over the higher price was not covered under the former tax code either.

What does that mean to the market? Experts disagree. Calculated Risk’s Bill McBride:

“I think the impact of reducing the MID from a maximum of $1 million in mortgage debt to $750 thousand in mortgage debt will have very little impact on the housing market.”

On the other hand, Capital Economics claims:

“The impact on expensive homes could be detrimental, with a limit on the mortgage interest deduction raising taxes for those that itemize.”

3. State and Local Taxes (SALT)

Original Proposal: The elimination of the state and local tax deduction (which includes property taxes).

The New Tax Code: Allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes.

Impact on the Market: Most experts agree that higher taxed regions will be impacted as homeowners in those communities now have a cap on these deductions.

Calculated Risk’s Bill McBride stated:

“SALT will have an impact on housing in some areas. Some people might choose to live in one state over another (if they have a choice), based on taxation. This could impact demand in certain states – especially for the middle and upper-middle class homeowners.”

Mark Zandi of Moody’s Analytics said:

“The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizers, and where homeowners have big mortgages and property tax bills.”

What will be the overall impact on the housing market?

For most of the country, the new tax code will not have a negative impact on the market. As Capital Economics reports:

“Given most households will see an overall tax cut, and potential buyers are likely to put that saving towards their home, we doubt it will have a significant detrimental impact on the housing market.”

There is also no doubt that some higher priced, higher taxed regions will be affected more than others. However, most experts agree that other portions of the tax code will favor the high-end buyer and seller, and this might mitigate many concerns. McBride explains:

“The corporate tax cuts (and other tax cuts) will mostly benefit the wealthy, and this will be a positive for high end real estate.”

What does this all mean to you?

To know for sure, you should sit with your accountant or financial planner and explore how all the aspects of the new code will impact your family.

Most families consider homeownership an essential part of the American Dream, and don’t purchase a home based solely on the tax advantages. The main reasons they buy a home are personal (they just got married, they are looking for a good place to raise children, they want to be near friends and family, they want to better enjoy their retirement, etc.). This will never change.

Looking at the new tax code, Mr. McBride’s opinion makes the most sense:

“There will be some negative impact based on SALT, but overall the impact of these policy changes on housing will be minimal.”

For more information, click here for a downloadable pamphlet.

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19050 S 196th Way Queen Creek, AZ 85142

$1,649,000
5 Beds
4.5 Baths
4,002 SqFt
Status Active
MLS # 6781309
Property Type Single Family Residence
Price Type --
Don't let this incredible property in La Jara Farms pass you by! This stunning single-level home offers over 4,000 square feet of exquisite living space, including a private guest suite with its own bedroom, bathroom, kitchenette, walk-in closet, and sitting area—complete with a separate entrance. Inside, enjoy an open floor plan highlighted by a floor-to-ceiling stacked stone fireplace, plantation shutters, an office/den, a spacious walk-in pantry, a butler's pantry, and a striking 14.5' x 6.5' granite kitchen island at the center of it all. The expansive master bedroom features a tray ceiling and a luxurious ensuite with dual walk-in closets, a walk-in glass shower with dual rain showerheads, and a soaking tub. Seeking your own personal paradise? Step through the telescoping sliding glass doors to your dream backyard. Relax in the pebble tec pool, enjoy the tranquil waterfalls, gather around the gas firepit, or entertain at the outdoor kitchen/bar complete with a sink, outdoor fridge, gas grill, and a powerful 60,000 BTU side burner with a wok cut-out. Need more space for all your toys? The air-conditioned 50' x 20' RV garage is ready to accommodate, with additional paved parking next to it. This property also offers two RV gates, providing convenient access from the front to the back. There are too many pavers to count. The property boasts an RV dump to use, after you come back from your trips. Don't miss this exceptional opportunity!

733 E Campbell Avenue Gilbert, AZ 85234

$1,649,000
8 Beds
7 Baths
5,734 SqFt
Status Active
MLS # 6768166
Property Type Single Family Residence
Price Type --
Welcome to your oasis of luxury and entertainment in Gilbert, where this nearly acre property offers unparalleled amenities without the burden of an HOA. The meticulously maintained landscape is irrigated for a mere ~$200 annually, ensuring lush surroundings year-round. Step inside to discover a renovated kitchen, featuring a stunning quartzite island and an inviting eat-in nook perfect for casual dining. Equipped with double ovens, gas stoves, a beverage fridge, and a separate ice maker, this kitchen is designed to cater to both everyday family meals and grand gatherings. Pull-out drawers in the cabinets provide effortless storage solutions, while the adjacent dining room comfortably seats over 14 guests. This home boasts not one but two primary bedrooms, each offering private walk-in showers and baths. The main level hosts a primary bedroom with dual closets, an adjoining office space, and a luxurious ensuite bathroom. Upstairs, the East wing features a spacious loft area and another expansive primary bedroom with a walk-out balcony. The basement has been tastefully remodeled with new flooring and a modern bathroom featuring a walk-in shower and vanity offering multi-generational living possibilities and ample entertainment spaces. Recent upgrades, completed approximately one year ago, include four new high-efficiency air conditioner units, a new dishwasher, new garbage disposal, new washer and dryer and piped gas lines for future tankless water heaters. The home is equipped with an ADT security system, water softener sytstem and outdoor WiFi coverage. Outside, enjoy a comfortably insulated attic room, a patio misting system and professionally maintained chimney and fireplace services. The beautiful pool has a new underwater light. Located near Freestone Park with abundant walking and biking paths. Don't miss the chance to own this rare Gilbert gem!

17667 E Cindercone Road Rio Verde, AZ 85263

$1,649,000
4 Beds
3.5 Baths
3,243 SqFt
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MLS # 6713753
Property Type Single Family Residence
Price Type --
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3523 E Cashman Drive Phoenix, AZ 85050

$1,649,000
5 Beds
3.5 Baths
3,710 SqFt
Status Active Under Contract
MLS # 6730295
Property Type Single Family Residence
Price Type --
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22015 N 59th Terrace Phoenix, AZ 85054

$1,645,000 - 4Br/5Ba -  for Sale in Desert Ridge Super Block 1 Southwest Phase 1, Phoenix
New
$1,645,000
4 Beds
4.5 Baths
3,505 SqFt
Status Active
MLS # 6781344
Property Type Single Family Residence
Price Type --
Shea Homes' most popular plan at Emblem at Talinn. Premium lot across from park east facing backyard abutting natural open space, lush landscaping with artificial grass and quartz pavers. Custom PebbleTec pool with Baja deck, water feature & fire pots. Enjoy the sunrise & mountain views from the covered patio with electric fireplace. Inside is a large chef's kitchen with GE Monogram appliance package, coffee bar, walk-in pantry, spacious quartz island with breakfast bar. Dining area opens to the great room with soaring ceilings. Downstairs is a secondary primary ensuite bedroom & an office/den that could be converted to a bedroom. Upstairs is the primary bedroom with large bathroom & walk-in closet, laundry room, 2 guestrooms and large loft that could be converted to a bedroom. Wood shutters throughout, remote-controlled blinds in the family room and kitchen. 3-car garage with epoxied floor, EV charger for 2 vehicles, plus separate area plumbed for utility sink and outlet for additional refrigerator. Water softener, whole house filtration system and tankless, gas water heater. Home is Energy Star 3.0 rated and includes Shea Connect smart home feature. Community pool & rec center with exercise & billiard room, community parks & playgrounds, walking & bike paths. Close to shopping, restaurants & entertainment. See Features and Upgrades list for more details.

24005 N 45th Drive Glendale, AZ 85310

$1,645,000
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MLS # 6783573
Property Type Single Family Residence
Price Type --
Stunning custom residence on a 20,052 sq.ft lot, featuring incredible curb appeal, a delightful desert landscape, & a spacious 5-car tandem garage. As you enter this home, you are greeted with soaring high ceilings with exposed beams that perfectly complement the wood-look flooring throughout. The modern fireplace serves as the centerpiece of the living room. The living area to the outdoors has large multi-sliders that open up to the back patio! The gourmet kitchen boasts marble counters/backsplash, white cabinetry accented w/crown moulding, top-of-the-line SS appliances, a center island, & a peninsula w/a breakfast bar. The primary bedroom has a private access to the back patio, a walk-in closet, & a spa-like ensuite w/dual vanities. The backyard is an entertainer's dream! The diving pool is complete with a stone waterfall & slide. A beehive fireplace for family gatherings await or BBQ with the built-in BBQ. You cannot help but fall in love with this home. Come on over as this gem will not last and make sure you check out the upgrades listed in the document tab.

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$1,645,000
3 Beds
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3,902 SqFt
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MLS # 6784110
Property Type Single Family Residence
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Discover unparalleled luxury and panoramic beauty in this remarkable contemporary estate. Perched on one of the highest lots in Cimarron Foothills Estates, this 3,902 sq. ft., 3-bedroom, 3-bath home is thoughtfully designed to maximize 360-degree views of mountains, city lights, and sunsets. Every corner of the home showcases expansive floor-to-ceiling windows, flooding the interior with natural light and framing the breathtaking landscape. Vaulted space accentuated by dramatic brick walls, knotty pine beams, and a dual-sided fireplace that lends warmth and ambiance to both the dining and living areas. The gourmet center island kitchen, outfitted with stainless steel appliances, granite counters, phenomenal views, and abundant storage, makes entertaining seamless. French doors throughout open to covered patios and decks, inviting the outdoors in and offering direct access to a beautifully landscaped yard. Seamless indoor/outdoor living. Outside, enjoy the heated pebble-tec pool, spa, and BBQ center nestled among beautifully landscaped 1.62 acres, with sitting areas strategically placed to soak in the spectacular views. Additional highlights include a private office, a versatile studio/workshop, and walk-in closets in every bedroom. Energy efficiency is ensured with an owned solar system, blending sustainability with this luxury property. Located within the highly sought-after Catalina Foothills School District, this exceptional home is more than just a residenceit's a lifestyle of elegance, privacy, and tranquility. Experience it in person and make this dream property your own!

8919 E Calle Del Palo Verde -- Scottsdale, AZ 85255

$1,644,000
3 Beds
3 Baths
2,891 SqFt
Status Active
MLS # 6731379
Property Type Single Family Residence
Price Type --
Updated and well cared for home in a most desirable North Scottsdale GATED COMMUNITY. This home is ready to move in boasting it's Gourmet Kitchen with high end appliances . Manicured yard on quiet interior lot makes this home stand out! Better hurry as it is priced to sell AND SELLER WILLING TO FUND THE LENDER COST OF A 2/1 BUYDOWN!

37181 N 103rd Street Scottsdale, AZ 85262

$1,640,000
4 Beds
3.5 Baths
3,952 SqFt
Status Active
MLS # 6659778
Property Type Single Family Residence
Price Type --
Located in the luxurious gated community of Cresta Norte, this 4 bedroom, 3.5 bathroom, 3 car garage Toll Brothers masterpiece is nestled in a private cul-de-sac with unobstructed views of Pinnacle Peak Mountain. Expansive courtyard with solid redwood doors leads to a dramatic entry. An entertainer's dream, this back yard contains an amazing 1200 sqft putting green, pool with cave waterfall, spa with glass fire pit, 2 covered patios, built in grill and countertop and a bar just steps inside the door. Inside, this split floor plan is ideal for any family or visitors alike. The master suite resides on one wing of the house bosting its own fireplace (1 of 3 in home), his and hers walk in closets, his and hers sinks, double shower, and jetted tub. The other wing has 3 large bedrooms all with en suite bathrooms. Amazing eat in kitchen with granite & stainless steel throughout and island. Bonus game room, custom wine cellar, amazing views, new AC units, tankless hot water heater. This property has been meticulously maintained by these second owners since 2007. Truly has it all.

7235 E Paradise Drive Scottsdale, AZ 85260

$1,640,000
5 Beds
3 Baths
3,881 SqFt
Status Active
MLS # 6684806
Property Type Single Family Residence
Price Type --
This remodeled 5 BR 3 BA 3881 sq ft home on cul-de-sac lot w/expansive lawn, landscaping, N-S exposure. Liv.Rm w/12 ft ceilings, separate Din.Rm. Large MBR w/gas fireplace, sitting area, bath area w/sunken tub,sep.shower & huge walk-in closet. 3 addt'l Bdrms, hall bath. Guest suite/office w/fireplace, huge shower & pvt.entry anchors west side of home. Inviting Fam.Rm w/firepl (gas or wood), soaring wood beamed ceilings. Large eat-in kitchen w/counter seating,walk-in pantry,Wolf range,Miele dishwasher,LG smart refrigerator & Profile microwave. Laundry Rm w/storage closet, work counter, stacked smart LG W/D. Luxury vinyl plank waterproof flrs. Greg Trutza designed park like backyard; fenced 20x40 htd pool & spa,MLB regulation batting cage, Lawn & raised garden beds w/separate irrigation. All of the improvements and upgrades in this totally remodeled home were completed in 2022-2023 and include: New roof and underlay - 2021 New luxury vinyl plank flooring through entire house - 2022 designated for industrial use that have the advantages of being waterproof, quiet and soft under foot. New baseboards through entire house - 2022 New doors and hardware through entire house - 2022 New switches and outlets through entire house - 2022 New LED ceiling lights through entire house - 2022 New grates and vents through entire house - 2022 New light fixtures inside and outside entire house - 2024 Entire home interior and garage painted 2022-2023 ENTRY WAY: New shatterproof glass installed next to front door Slate installed outside front door at entry way KITCHEN: New cabinets and hardware Newer sink Newer faucet with spray Newer Wolf oven (never used) Newer LG smart refrigerator with convertible middle drawer and custom ice cube feature Miele dishwasher with third cutlery rack and crystal/china cycle Newer GE microwave with high power vent Newer sliding glass doors Newer granite countertops Newer slate patio off of kitchen Built in gas grill on patio LAUNDRY ROOM: New cabinets New granite countertop New sink New smart faucet with spray New fan vent New LG smart stacked washer/dryer 5th BEDROOM/OFFICE SUITE with FULL BATHROOM & PRIVATE ENTRANCE: New fireplace tile surround Newer cabinet in bathroom Newer sink and faucet in bathroom Newer quartz countertop Newer shower doors Newer wall and floor tile in shower Newer shower head in oversized shower Newer bathroom hardware Newer Toto toilet MASTER BEDROOM: Newer fireplace surround Newer slate patio off master bedroom through sliding glass door MASTER BATHROOM: Newer mirror with tile border Newer cabinets Newer Kohler sinks Newer faucets Newer quartz countertop New tile bathtub Newer shower doors Newer bath faucet Newer shower tile Newer shower fixture Newer Toto toilet Newer bathroom fan Newer shatterproof glass window in shower area Newer bathroom hardware Newer built in ironing board in closet Huge/Oversized walk-in Closet HALL BATHROOM: Newer mirror with tile surround Newer cabinet Newer quartz countertop Newer Kohler sinks Newer faucets Newer bathroom hardware Newer Toto toilet Newer bathroom fan Newer Kohler heat retaining bathtub Newer tile in shower Newer shower head Tankless hot water heater for master and hall bath - 2022 Hot water heater - kitchen, laundry room and guest bath Newer water softener Outdoors: All block walls repaired, sealed and painted. Irrigation system checked with all new drip lines and emitters installed, all new lawn heads installed, by irrigation company Grass - plug aerated in 2022 (watering costs run between $150-$300 on average depending on the season). Newer pool water clock installed, remaining two clocks checked by irrigation company Swimming pool/Spa - all work completed in 2023 Pebbletec with LED Lighting Swimming pool is 20'x40' could be suitable for diving. There is also a large play step in the shallow end for relaxing or for young children. Pool is completely fenced with two decorative gates that can be locked. Pool Upgrades include: Newer interior tile border Newer in floor cleaning system Newer Pebble Tec interior (pool & Spa) Newer LED lights Cool deck resurfaced Newer pool heater Pool raised planter area resurfaced and sealed Backyard - large and park like area Large raised garden beds with separate irrigation. Three connected beds suitable for large vegetable, flower and herb gardens. Four carefully chosen citrus trees: prolific Lisbon lemon, blood orange, Minneola tangelo and Arizona sweet. Fig tree Large grassy space suitable for soccer, volleyball, badminton, croquet, informal baseball game. MLB regulation batting cage with new LED night lights - can also be used to practice your golf swing. There is additional room for a putting green, sports court, built in play sets, guest house/second office, gazebo, outdoor kitchen. You are limited only by your imagination in the ways that you can enjoy this spacious backyard. Garage: Complete wall of new storage cabinets There is extra roof covering material and luxury vinyl planks for changes, add-ons you may choose to do.

8901 N 87th Court Scottsdale, AZ 85258

$1,639,000
4 Beds
3 Baths
2,706 SqFt
Status Active
MLS # 6754801
Property Type Single Family Residence
Price Type --
Welcome Home to this Gorgeous Fully Remodeled Modern 4 Bdrm, 3 Bath Home w Great Room, Living Room, Formal Dining, Chef's Kitchen w/ Decton Countertops, Diving Pool, Putting Green, and Custom Features all on a Cul-de-Sac Lot! The home underwent a full remodel in 2020 including windows and roof replacement and owners continued remodel by adding a 3rd bathroom. The 4th bedroom or in-law quarters comes complete with a private entrance and is perfect for extended family and guests. Spend countless hours entertaining in the amazing backyard with the 10 foot deep pool, 20X40 covered ramada and golf putting green. This home combines luxury and practicality, making it the perfect choice for any buyer seeking comfort, style and outdoor living at it's finest all in the school district w the 3 Cs

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