New Tax Laws Have Home Buyers Checking New Places

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New Tax Laws Have Home Buyers Checking New Places

 

The new cap on deductions for taxes, including on property, have people looking for deals outside high-tax states; Florida and Nevada more popular after GOP overhaul

New tax rules that cap deductions of state and local taxes are having a disproportionate effect on taxpayers who live in states with high income taxes and property taxes.

While it’s too early to quantify the impact of the Tax Cuts and Jobs Act, which became effective on Jan. 1, some real-estate professionals say they are beginning to see early signs of an exodus to low-tax states.

“I’ve seen a huge increase in the number of clients who want to purchase in Palm Beach to establish residency in Florida,” says Chris Leavitt, director of luxury sales at Douglas Elliman Real Estate in Palm Beach. “And there has been a pickup since Jan. 1.”

Recently, Mr. Leavitt was dining at a restaurant in Palm Beach when he ran into four couples from New York City who were all in Palm Beach to look for real estate to establish residency in Florida. “They were finance people in their mid- to late-30s looking in the $700,000 to $1.5 million range for condos on the island,” he says. “That night I saw before my eyes how this tax law is impacting the real-estate industry here.”

Before the new rules, taxpayers who itemized could write off an unlimited amount of state and local taxes, unless disallowed under the alternative minimum tax. But now, the deductions are capped at $10,000.

The change most affects taxpayers in states with high income and property taxes. According to the Tax Foundation, a pro-growth tax-policy nonprofit, the six states with the highest state and local tax deductions as a percentage of income are New York, New Jersey, Connecticut, California, Maryland and Oregon.

Of course, there are provisions in the new tax law that benefit high-net-worth individuals, such as a reduction in the top individual tax rate and an increase in the estate and gift tax exemption.

From the Wall Street Journal
Illustration: Chris Gash
By  Robyn A. Friedman
June 6, 2018 

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