ASHINGTON – May 22, 2019 – A year ago, the new $10,000 cap on the federal deduction for state and local taxes prompted dire predictions for the real estate market, especially in expensive areas like New York and San Francisco.
In these and other high-tax places, local property taxes alone can cost more than $10,000 a year. Many finance experts warned that limiting what these residents could deduct from their local taxes would lower home values and hurt governments’ property tax revenue along with it.
As it turns out, those predictions were wrong – at least on a large scale.
“The actual response in the real estate market has [been] kind of all over the place,” says Rudy Salo, a public finance attorney at Nixon Peabody in Los Angeles. “In general, the effect has been less than all the doomsayers – and that includes myself – thought.”
The national real estate market was already slowing down before federal tax reform, so it’s difficult to isolate what activity is driven by the tax change. But the new limit on the state and local tax (SALT) deduction hasn’t led to a total real estate meltdown in high-tax markets.
Source: © 2019 Governing, Liz Farmer. Distributed by Tribune Content Agency, LLC