The American Dream TV Show – March 25, 2018 – My segment begins at 18 min. 05 seconds into the video. I discuss Nashville’s HOT market and how it is affecting how we look at home inspections, whether you are a buyer or a seller. Give me a call if I may answer any additional questions you have! Would love to hear from you!
Could now be a good time to sell your home?
The Dow Jones Industrial Average is just under 25,000. Deputy chief economist Len Kiefer announced a positive economic outlook saying “Treasury yields are higher and the economy has strengthened since December”. As a result, and as I projected in my fall blog, interest rates on a 30 fixed mortgage have gone up; and they’ve gone up 48 basis points since January. When this happens, historically the real estate market slows, however not this time. Coming off of a strong 2017, there still wasn’t enough inventory to meet the demand of the buyer community. “We think the strength of the economy and pent up housing demand should allow the U.S. housing market to post modest growth this year even with higher mortgage rates” Kiefer goes on to say. Along with interest rates and buyer demand, home prices have also been going up, showing an increase of 7.1% over the last year. That means your $350,000 home will now sell for roughly $375,000.
For so many people, the equity they have in their home is a big part of their net worth. I always tell my clients, I don’t determine the price of your home nor does the consumer, the market dictates the price of a home. So we are in a unique moment in time where while rates have increased, so too have the number of qualified buyers and the value of your home; yet inventory remains low. Right now, you have an opportunity to perhaps be one of just a few, perhaps even the only home for sale on your street or in your neighborhood! What does this all spell out? Well, if you’re a home owner that is looking to downsize, now may be a very good time to list. If you are a homeowner and are looking to go bigger, you may also consider listing because rates are still very low, but are climbing. I recently had a client say, “if I list now, I may get more money from the sale of my home, but I’m also going to pay more for my next home!” My response was simple: “use a mortgage calculator and plug in 4.5%, 5%, 6% and 7% because in doing so you will see the impact mortgage rates will have on your decision making. All I’m saying is that if, in the back of your mind you have considered selling, you should have a market analysis done on your home, be presented with the facts and make an educated decision. I’ve seen the cycle of real estate for many years; too many people wait too long, in hopes to max out their equity, which is extremely difficult to project.
Tax Cuts & Jobs Act: How will the new tax laws affect you?
Part 1: The new brackets
Part 2: Deduction Changes
Part 3: The Big Winners
Disclaimer: The examples provided are for illustrative purposes. Individuals should consult a tax professional regarding their unique financial position
In comparison to the old tax brackets, the new rates are slightly lower and the brackets are broader. In simple terms, the new tax brackets as a whole, will save most people some money, which is always great. What’s important to look at is where you were last year (what tax bracket) and if this year was a mirror image, what would happen under the tax cuts and jobs act.
For example, if you were filing single and earned $157,000 under the new tax brackets, you would pay 24% in taxes, or $37,680, giving you a net of $119,200. Last year you would have paid 28%, ($43,960) netting you $113,040. So now in 2018, you have $6,160 more in your pocket. That’s a new car payment, a vacation or money you can put into a retirement account, all good stuff that will trigger spending and/or investing which boosts the overall economy. However, by making just 3,000 more, $160,000, you fall into the 32% tax bracket in 2018 and were still in the 28% bracket in 2017. So by making $3,000 more, you only bring home $108,800 in 2018 ($160,000 – $51,200 )versus $111,200 in 2017. In this case, you took a 4% hit in net income ( 2017 income on 160k= $111,200 vs. 2018: 108,800). In that scenario, you would earn $2,400 less under the new tax brackets.
Here’s another quick example:
Johnny made $40,000 as a single tax payer in 2017. His tax rate was 25%, paying $5,739 in taxes. Under the 2018 tax bracket, Johnny is now only paying $4,740 in taxes (22%), giving him an extra $999 to save or spend. That’s just on the tax bracket side of things as Johnny will also benefit from the increase in standard deductions.
As you can see in the diagram, they have doubled the standard deductions and eliminated the personal exemptions. Being that 70% of American’s don’t itemize their deductions, this is also an added savings for most.
Tax brackets, rates and credits play a large role in how much a taxpayer will pay, but the amount of taxable income plays an EVEN BIGGER role. So here’s a very simple reference for my readers to know and understand about the new law:
- Personal and dependent exemptions are eliminated. However, child tax credits have increased through 2025. The TCJA increases the maximum child tax credit from $1,000 to $2,000 per child. The refundable portion of the credit increases from $1,000 to $1,400. So taxpayers who don’t owe tax can still get a credit of up to $1,400. The higher child tax credit will be available for qualifying children under the age of 17 (as under current law). In addition, the TCJA allows a new $500 credit for dependents who do not qualify for the child tax credit. These are children who are too old for the child tax credit, or non-child dependents. No social security number is required, you can cliam the credit using an Individual Tax Identification Number (ITIN) or and Adoption Tax Identification Number (ATIN).
- Standard Deductions Increase
- $12,000 (single)
- $18,000 (head of household)
- $24,000 (married filing jointly)
This means you don’t have to file a schedule A. That said, you may want to continue to track your expenses so you know whether or or not the standard deduction or itemized deduction process favors you more.
- Changes to Itemized Deductions:
- Employee business expenses
- Tax preparation fees
- Investment interest expenses
- Personal casualty and theft losses (with the exception of federally declared disasters)
- Moving expenses (minus US military required relocation)
- Alimony- no longer deductible AND the spouse receiving alimony does not have to report alimony as income
Limitations put on old deductions: it’s very evident, one is encouraged to use the new standard deductions offered vs itemization. If you’re one of the 30% of American’s that used itemized deductions, you need to know what has been modified or eliminated.
- SALT Tax (state and local tax): still deductible but only up to a combined total limit of $10,000 ($5,000 if MFS). This can make a difference in high taxed states like New York or California
- Mortgage Interest
- Limited to interest paid on up to a $750,000 mortgage ($375,000 if MFS) on a mortgage taken after 12/14/2017
- Home Equity Loans- The final bill repeals the deduction for interest paid on home equity debt through 12/31/25. Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence.
- If you’ve taken out a mortgage prior to 12/15/2017, you can deduct mortgage interest up to a $1MM mortgage moving forward. That applies if you refinanced your mortgage prior to 12/15/2017 ($550k if MFS)
- Medical expenses- still deductible to the extent they exceed 7.5% of AGI (adjusted gross income)
- Charitable contributions: These have expanded. You may contribute up to 60% of your AGI, up 10% from the former 50% number
- IRA deduction
- Health Savings Account deduction
- Student loan interest
- Educator expense deduction ($250 for unreimbursed classroom supplies)
- Deductions for the self-employed (self-employment tax, health insurance, qualified retirement contributions etc)
- You can continue to claim the American Opportunity Credit of up to $2,500 per year for the first 4 years of college education. In addition, you can still earn the lifetime learning credit of up to $2,000 per year for education expenses
- 529 plans may now be used for K-12 expenses- plans can distribute up to $10,000 each year for tuition related to public or private education
- The Obama administration’s health care penalty for those not enrolled in a health care plan has been eliminated
The Biggest Winners of the Tax Cuts & Jobs Act: Businesses
There are two primary types of businesses:
- Corporations- C-Corps. These businesses pay corporate tax using the corporate tax brackets. They pay dividends to their shareholders who are then taxed on their gains
- Pass Through entities: LLC’s, Sole Proprietors, S-Corps and Partnerships. In this business structure, the business does not pay taxes. The profits of these businesses are “passed through” to the owner(s) whom are taxed on the individual tax bracket schedule.
With the intent to create more jobs and keep American businesses from moving offshore, C-Corps will go from paying 35% to 21% in corporate taxes. Truly the top win in the new bill, corporations are encouraged to deliver more jobs, keep their businesses on US soil and subsequently a greater overall tax base for this country. One set of beliefs is that this needed to be done to grow America; that doing business in America was costing many American businesses millions and in some cases, billions of dollars; vs heading overseas and employing foreign employees while paying substantially less in taxes. The flip side argument is that it’s merely taking away entitlement programs and supplying the top 1% with a substantial boost in income and shareholder wealth. The fact, which is what I present to my readers is from a historical perspective, growth in American business means growth to main street USA. Growth in Main-street USA is undeniably critical to balance our economy.
2n Place Prize: Pass-Through Business Owners: pass-through businesses will receive a 20% deduction on their income. So if you are Suzie Creamcheese LLC and you, after all of your legal business expenses, show a $100,000 profit to your business, you now get an additional 20% tax savings; taking your adjusted income to $80,000.00. In addition, at $80,000 income are also saving an additional 3% on the newly introduced tax brackets. If you’re a small business owner, I encourage you to click on the link below in addition to having a clear meeting with your accountant. You should learn some of the particulars and restrictions as certain industries have limitations to this new law, it’s not a blanket 20% for all small business owners:
Overall we will be paying less in taxes. This should in turn generate spending and the opportunity for businesses to employ more people, which historically equates to a stable economy. These changes as it relates to the real estate and mortgage industries should end in:
- Increased prices on homes
- More inventory
- Higher interest rates
To my readers that are considering buying, my recommendation is to do it sooner than later. For my sellers, know the market value of your home, contact me if you don’t know it and I will help you. Your home is a tremendous asset and being informed always provides you with the knowledge you’ll need to make educated decisions. Thank you very much for reading my blog; I hope you find value in my research.
2017 was certainly an interesting year! We had more buyers, and looser mortgage guidelines, qualifying more people for a home loan. We still maintained incredibly low interest rates with noisy politics and uncertainty contributing a great deal to that. As supply and demand would have it, we saw an increase in demand for home ownership but a shortage of supply as low inventory was the only thing holding the housing market back from a sure explosion. That led to home values increasing and a shift from a buyers- market; to a sellers- market.
So here we are its 2018 and we are seeing incredible economic growth. The Dow Jones Industrial average is soaring to record levels, unemployment rates are at a 17-year low and job growth predictions are all leading to signs of a very healthy America in 2018; from an economic perspective.
So what does all of this mean to you? Well it’s always important to know what is going on in the real estate market because if you are a home owner, you should always know the current market value of your home. If you are considering selling, you of course want to know how much cash you can get out of your sale. And if you’re looking to own a home, you want to know what the interest rates are, what they are projecting to be and what the inventory situation looks like to make better, more informed decision.
It’s expected that historically low interest rates, still baffling to even the most seasoned analysts, will gradually rise to an average of 4.5% percent over the next 12 months. Inventory is expected to increase, but moderately; making 2018 thus far, a sellers- market.
“This will be the first of many years to come in which it’s all about the millennial first-time homebuyer,” said Mark Flemming, chief economist at First American Financial Corp, a title insurance company. “ Find ways to appeal to those buyers, and it’s likely to be a successful year.”
Millennials, first time home buyers and self-employed individuals finally have access to options they really didn’t have after the mortgage meltdown. Let’s face it, most rentals today aren’t as desirable and they are more expensive as sellers of nicer properties have opted to “cash out” and sell once the market recovered. What I have recommended to interested buyers in our community is define where you are at financially and what your credit score is; then learn what products exist today that will get you qualified. For my sellers or potential sellers, get a free market analysis and know the market value of your home; you might be pleasantly surprised.
This world is crazy…social media centered for better and for worse! Take caution with your posts so you don’t have issues selling your home! Watch this 2 minute video of a true story that just happened with one of my listings. From twitter 2014!!!
For any homes over $500,000, your write-off would go down tremendously. Nooooo! ——- Jacey
Woohoo! So honored to be a part of the bringing @TheAmericanDreamTV to Nashville Saturdays on the CW network. I was nervous and my hair was a little too big but if you can look past that, take a gander at my clip on new home building in Nashville. It’s SO critical to have strong REALTOR® representation when building. It’s a very different process from buying a re-sale from contracts and contingencies through design and inspections…empower yourself with a strong REALTOR® partner! Oh, and checkout my favorite listing in Green Hills—- it went UNDER CONTRACT 9 days after the show aired in a multiple offer situation. Yes! Have an empowered week! – Jacey
EZ Checklist – Prepare Your Home for Fall/ Winter
By Jacey Cook – Oct 20, 2017
Hey Everyone! Fall is the perfect time to take care of the little things that can make a big difference for you and your home! I compiled this list to make your life easy. Most of these can be done by a regular home-owner but a few require professional service!
- Clear out the Gutters & Trim Trees – Remove leaves and other debris from your drainpipes and gutters to prevent clogging. Trim back trees touching any rooflines.
- Fertilize Your Lawn – According to experts, fertilizing your lawn in fall will protect it over the winter and help it green up faster come springtime.
- Check Your Heating System – Do a check of your home’s heating vents to make sure they’re not blocked or covered by furniture, carpeting, or curtains. Dust vents and clean or change all filters. Make an appointment for an annual heating system check-up service.
- Clean the Fireplace/Chimney – You can clear ash and charred wood from the fireplace yourself, but leave the chimney cleaning to a professional. Have the chimney cleaner (chimney sweep J) check the damper to ensure it tightly closes to prevent drafts
- Store Air Conditioners – If you have removable ACs, unplug, drain, dust and clean them before covering/storing.
- Check Your Home for Drafts – Save energy, and reduce your heating bills by examining windows and doors for cracks and sealing them with weather-stripping and/or caulk.
- Ready Outdoor Faucets & Irrigation Systems – Drain/remove/cover outdoor faucets and irrigation systems to prevent breakage. It’s much more fun to do this before it is freezing.
- Inspect Your Roof – Check for damaged or curled shingles, corroded flashing, or leaky vents. Use common sense. Consult a professional if not easy!
- Drain & Clean Your Water Heater – Clear out any debris that has settled in the tank.
- Perform a Home Safety Check – IMPORTANT annual ritual. Test smoke detectors and CO2 monitors, inspect (or install) fire extinguishers, review fire escape and storm protection plans.
- Drain, Store & Sharpen Your Lawn Equipment – Over time, unused gas goes through chemical changes which lead to gum and harmful deposits that can destroy lawn equipment. Usually around mid-October you should drain the tanks of your mower, leaf blower, and weed eater. Fall is also a good time to get your lawn mower blades sharpened so they’ll be ready for next Spring.
HAVE A HAPPY HAPPY FALL!