NEW YORK – April 17, 2019 – A new report from the New York Federal Reserve Bank indicates that the 2017 Tax Cuts and Jobs Act (TCJA) is partly to blame for the slowdown in the housing market because it reduced incentives to buy homes.
The law was expected to increase after-tax homeownership costs by capping the amount of mortgage debt interest, but make up for that loss by doubling Americans’ standard deduction and lowering marginal tax rates.
“Before the tax law, the incentive to purchase and even trade up was in the itemization of taxes,” says Jonathan Miller, CEO of the real-estate appraisal firm Miller Samuel. “The ‘reform’ aspect of the tax cut replaces the direct messaging long enjoyed by housing.”
According to New York Fed economists Richard Peach and Casey McQuillan, capital costs appear to have increased to 5 percent from 1 percent for homes where the amount borrowed exceeds $750,000.
Source: Markets Insider (04/15/19) Heeb, Gina
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