Author Topic: Impact of proposed President Trump tax cuts on landlords?  (Read 1198 times)

FrugalSaver

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Impact of proposed President Trump tax cuts on landlords?
« on: September 27, 2017, 02:11:39 PM »
Eliminates property tax deduction?


Cwadda

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #1 on: September 27, 2017, 02:23:54 PM »
Do you have a link to this or can otherwise elaborate?

ixtap

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #2 on: September 27, 2017, 02:54:28 PM »
It wouldn't surprise me if that still counts as a business expense, just not a personal one. Current "framework" unclear.

ketchup

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #3 on: September 27, 2017, 03:10:25 PM »
Oh.  That sure sounds like it would benefit a wealthy real estate mogul.  Hmm.

ixtap

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #4 on: September 27, 2017, 03:19:12 PM »
Oh.  That sure sounds like it would benefit a wealthy real estate mogul.  Hmm.

It was pure speculation, though. Reducing the pass through bracket will certainly benefit the T. Empire.

Another Reader

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #5 on: September 27, 2017, 03:30:17 PM »
Property taxes on rentals are business expenses and will remain deductible.  Standard deductions will increase, things like mortgage interest and property tax deductions on your residence will disappear.  Going to be tough to raise property taxes in the high property tax states if this happens...

FrugalSaver

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #6 on: September 27, 2017, 07:16:25 PM »
Property taxes on rentals are business expenses and will remain deductible.  Standard deductions will increase, things like mortgage interest and property tax deductions on your residence will disappear.  Going to be tough to raise property taxes in the high property tax states if this happens...

I'd guess that would impact states like New York and Texas. Would be interesting to see what that does to the states that have almost usury tax rates and increases

Slow2FIRE

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #7 on: September 27, 2017, 11:43:40 PM »
Property taxes on rentals are business expenses and will remain deductible.  Standard deductions will increase, things like mortgage interest and property tax deductions on your residence will disappear.  Going to be tough to raise property taxes in the high property tax states if this happens...

It doesn't seem like they were discussing making those deductions disappear any time soon, but it sure will be easier to make them disappear after raising the standard deduction and showing people that now only the "rich" use it.

Cwadda

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #8 on: September 28, 2017, 02:16:17 PM »
Can someone please explain the proposed tax cuts?  Or link an article to them? 

Slow2FIRE

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #9 on: September 28, 2017, 02:57:24 PM »
Can someone please explain the proposed tax cuts?  Or link an article to them?

What I have read and heard is that the desired tax changes are:
- No State and local tax deduction
- Old tax brackets: 10%, 15%, 25%, 28%, 33%, 35%, 39.6%
- New tax brackets:  12%, 25%, 35%
- Standard Deduction increased to $12,000 for a single person and $24,000 for married filing jointly
- Top Corporate tax dropped to 20%
- Pass through corporations now use the top corporate rate instead of ordinary income tax rates

No mention that I have yet heard for the following:
- income level for each of the three brackets
- will personal exemptions still be around?
- What happens with AMT

Speculative:
- they *may* kill mortgage deduction
- higher standard deduction will kill charitable donations and home sales
- healthcare insurance deduction is going away
- Will this even be what Trump has asked for?
- Will we be able to do our taxes on just one page?

ixtap

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #10 on: September 28, 2017, 03:01:48 PM »
Can someone please explain the proposed tax cuts?  Or link an article to them?

What I have read and heard is that the desired tax changes are:
- No State and local tax deduction
- Old tax brackets: 10%, 15%, 25%, 28%, 33%, 35%, 39.6%
- New tax brackets:  12%, 25%, 35%
- Standard Deduction increased to $12,000 for a single person and $24,000 for married filing jointly
- Top Corporate tax dropped to 20%
- Pass through corporations now use the top corporate rate instead of ordinary income tax rates

No mention that I have yet heard for the following:
- income level for each of the three brackets
- will personal exemptions still be around?
- What happens with AMT

Speculative:
- they *may* kill mortgage deduction
- higher standard deduction will kill charitable donations and home sales
- healthcare insurance deduction is going away
- Will this even be what Trump has asked for?
- Will we be able to do our taxes on just one page?

The "framework" specifically eliminates both personal exemptions and AMT.

BigRed

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #11 on: September 29, 2017, 08:09:21 AM »
The "framework" specifically eliminates both personal exemptions and AMT.

I'm not sure if the framework specifically states it, but there's a lot of discussion about eliminating the state and local tax deduction.  If that happens, the AMT would be irrelevant, as I don't believe there would be any remotely plausible individual tax situation that would have it kick-in.  The one exception would be the new pass-through rules, I guess.  But, yes, no more AMT.

Slow2FIRE

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #12 on: September 29, 2017, 09:32:25 AM »
REIT shareholders *should* get lower taxes on dividends with the pass through rate.  I can't say that this is absolutely true, but it seems to make sense since REITs are pass-through entities.

bobechs

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #13 on: September 29, 2017, 09:39:14 AM »
Anyone who thinks they can unfold the generalities of the so-called framework into a set of corresponding tax code changes and follow-on administrative  and court rulings is soooo smart they should just get ultra-rich timing the market highs and lows and let the tax chips fall where they may.

powskier

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #14 on: October 08, 2017, 06:06:31 PM »
A Trump statement/promise/tweet/plan means nothing until a bill is actually signed into law.
Making any concrete consideration based on what comes out of his mouth is not worth it.

RangerOne

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #15 on: October 19, 2017, 01:22:11 PM »
Eliminating AMT will certainly remove a lot of complexity, stupid tax I have ever tried to understand. However I don't think there is anything particularly complex about personal exemptions. Its pretty much just a straight deduction for headcount in the family.

Worst of all if the removed personal exemptions they are essentially killing the mortgage deduction relative to the standard. It will be very hard for an average family to have mortgage interest in an amount which competes with a $24k standard.

A change like this would definitely hit housing markets like California.

If they want things simple and they want to keep a mortgage deduction, I think they need to ax itemizing for the vast majority and turn the mortgage deduction into a tax credit. Maybe that would get discussed as a concession to the housing lobbist.

My feeling is the current proposal mostly shafts the middle class from lower to upper tiers and leaves us all slightly worse or better. If they really want to get rid of AMT and the estate tax, I think they will have to throw a bit more of a bone at least to the upper middle class to get this thing to pass.

Thats not even considering all the nasty battles they will face in trying to close even a single corporate tax deduction. It really F's with peoples numbers when they kill specialized deductions. Though its probably overdue for a reset.

matchewed

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #16 on: October 19, 2017, 05:06:55 PM »
Given the lack of an actual bill on the floor I'm not going to start evaluating impact at this time.

Slow2FIRE

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #17 on: October 19, 2017, 07:34:02 PM »
Worst of all if the removed personal exemptions they are essentially killing the mortgage deduction relative to the standard. It will be very hard for an average family to have mortgage interest in an amount which competes with a $24k standard.

A change like this would definitely hit housing markets like California.

If they want things simple and they want to keep a mortgage deduction, I think they need to ax itemizing for the vast majority and turn the mortgage deduction into a tax credit. Maybe that would get discussed as a concession to the housing lobbist.

My feeling is the current proposal mostly shafts the middle class from lower to upper tiers and leaves us all slightly worse or better. If they really want to get rid of AMT and the estate tax, I think they will have to throw a bit more of a bone at least to the upper middle class to get this thing to pass.

Honestly, the Mortgage deduction is a regressive giveaway to people who are big spenders on housing and helps contribute to housing being less affordable in the US than it could be.

It really isn't "fair" for renters and people with modest homes (sub $200K) to subsidize higher income people with up to $1,000,000 of mortgage debt (and the higher their tax bracket, the more value it has in subsidizing them).

I say this as someone who is in a household that is deep in the top 10% of income earners with a $400K mortgage.  The break is there, I will use it, but at the same time I disagree with having it available for me or anyone to use.

Dicey

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #18 on: October 19, 2017, 11:37:16 PM »
Given the lack of an actual bill on the floor I'm not going to start evaluating impact at this time.
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matchewed

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #19 on: October 20, 2017, 05:18:26 AM »

Poundwise

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #20 on: October 20, 2017, 08:05:07 AM »
Honestly, the Mortgage deduction is a regressive giveaway to people who are big spenders on housing and helps contribute to housing being less affordable in the US than it could be.

It really isn't "fair" for renters and people with modest homes (sub $200K) to subsidize higher income people with up to $1,000,000 of mortgage debt (and the higher their tax bracket, the more value it has in subsidizing them).


Please take regional differences into account.  In the NY metro area where I live, sub $200K gets you, at most, a one bedroom apartment, 825 square feet, near the highway and in poor shape. Why live here? Well, family, friends, and jobs.

I've been trying to think through what will happen if homeowners lose the property tax and mortgage interest deduction.  It seems to me that this will throw local governments in areas with high housing costs into crisis, property values will crash, and not just for homeowners but for landlords too.  So this may be good if you are looking to enter a market, but bad if you already own. It may be a time for (large) landlords like Trump, with extra cash, to snap up bargains. 

Eventually, once homeowners who are not able to afford their homes without the deductions have sold and left, property values will stabilize again, but since there are so many people eager to live in areas within a livable commute of the big cities, I am not sure whether the prices will go down significantly.

Personally, I am concerned that this will be damaging to my community, which is a working-class suburb struggling to retain its nature in the face of development.  I expect that many families will have to sell to investors, who will knock down the single-family homes and build rental units. However, with falling property taxes, services including schools will decrease in quality. Ultimately, this will become a less desirable place to live, since if you want to live in an apartment near the city, with access to mediocre schools, there are many better options... and landlords will find themselves with empty units. 

RangerOne

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #21 on: October 20, 2017, 05:31:22 PM »
Worst of all if the removed personal exemptions they are essentially killing the mortgage deduction relative to the standard. It will be very hard for an average family to have mortgage interest in an amount which competes with a $24k standard.

A change like this would definitely hit housing markets like California.

If they want things simple and they want to keep a mortgage deduction, I think they need to ax itemizing for the vast majority and turn the mortgage deduction into a tax credit. Maybe that would get discussed as a concession to the housing lobbist.

My feeling is the current proposal mostly shafts the middle class from lower to upper tiers and leaves us all slightly worse or better. If they really want to get rid of AMT and the estate tax, I think they will have to throw a bit more of a bone at least to the upper middle class to get this thing to pass.

Honestly, the Mortgage deduction is a regressive giveaway to people who are big spenders on housing and helps contribute to housing being less affordable in the US than it could be.

It really isn't "fair" for renters and people with modest homes (sub $200K) to subsidize higher income people with up to $1,000,000 of mortgage debt (and the higher their tax bracket, the more value it has in subsidizing them).

I say this as someone who is in a household that is deep in the top 10% of income earners with a $400K mortgage.  The break is there, I will use it, but at the same time I disagree with having it available for me or anyone to use.

The current structure I agree gives an unduly large tax break potentially to people who can take out a million dollar loan. Though I am not confident how that factors out since I would imagine many of these people are paying AMT?

There are probably more fair ways to structure this break to remove its regressive components. Though I really hate cutoffs and phase outs at the Federal level since they tend to punish high cost of living states. Earning $130k phase you out of a lot of breaks, but earning $130k means a very different lifestyle in California or New York versus Arizona.

The more important question is do we even want to continue to attempt to encourage home ownership via a tax break? If not they should remove it in phases. The break has already partially distorted home prices by making carrying costs cheaper. So peoples assets values will likely take a hit in some areas if there is no longer a tax advantage to owning.

sokoloff

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Re: Impact of proposed President Trump tax cuts on landlords?
« Reply #22 on: October 21, 2017, 08:38:09 AM »
The "framework" specifically eliminates both personal exemptions and AMT.
I'm not sure if the framework specifically states it, but there's a lot of discussion about eliminating the state and local tax deduction.  If that happens, the AMT would be irrelevant, as I don't believe there would be any remotely plausible individual tax situation that would have it kick-in.  The one exception would be the new pass-through rules, I guess.  But, yes, no more AMT.
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