How are investors preparing for SALT cap of $10,000 now
The new tax law starting in 1/1/2018 states you’re now capped out at $10,000 for SALT. There is no distinction between investment and home ownership in the law. That means you can’t legally deduct anymore then $10,000 for all State and local taxes. In the past this was unlimited. If taken you’ll run the risk of an audit down the road.
In my area (Tri-state NYC) we’ve seen two straight quarters of a slowdown in luxury sales. Landlords on rentals are giving substantial incentives to rent in NYC for example in order to get their units rented now across almost all price points which means it’s trickling down. The once red hot Brooklyn market has slowed susbayialky and prices are coming down especially on new developments they can’t sell. Plenty are now reassessing and considering it already turning condo projects into rentals. That’s created a ton of supply. Seeing the same happen in Austin another once red hot market.
For the most part it’s being ignored by many Real Estate owners. Brokers I’ve spoken to mostly say it has no effect which is factually incorrect.
There were a mass of savvy investors and homeowners running to prepay 2018’s Real Estate taxes to get the last of their deductions at the end of last year for example so they knew how dramatic the effect would be.
With so many attempting to make a new business of becoming a landlord or seasoned veterans also ignoring the effect of this 7 year law it sets up a recipe for a problem.
How are you preparing for it in the current priorities or new projects you’re looking at?