VOL. 41 | NO. 40 | Friday, October 6, 2017
Tax reform could have big impact on homeowners
Some details of the GOP tax reform proposal were released last week, and the National Association of Realtors is not happy.
The association tells its members that a group of legislators and administration leaders known as the “Big 6” released an outline “that, if enacted, could lead to a tax on home ownership for millions,” the release posted on the NAR website stated.
“We have always said that tax reform – a worthy endeavor – should first do no harm to homeowners,” NAR president William A. Brown stated. “The tax framework presented by the Big 6 missed that goal.”
The association’s position is the plan will have a negative effect on those owning homes and using standard deductions.
Only those whose income would place them among the top 5 percent of Americans would benefit from this plan, NAR officials say, and the reform would “all but nullify the incentive to purchase a home for most, putting home values across the country at risk.”
The new program would do away with the deduction for property taxes, as well as other deductions. The new proposal “recommends a backdoor elimination of the mortgage interest deduction for all but the top 5 percent who would still itemize deductions,” according to NAR.
A wealth management executive I spoke with noted there is no tax incentive to buy stocks, adding an individual cannot borrow $400,000 to buy stock and deduct the interest on that loan.
Nor can a person invest $100,000 in the stock market and sell those securities for $200,000, then roll that $100,000 profit into more stocks and not pay interest on the profit as property owners can with 1031 property exchanges.
The question is why should real estate get this special treatment? The answer seems to be “because it always has.”
Based on personal experience, many homeowners are unaware of the tax benefits when they first purchase a home, but are thrilled when the tax return is filed and they are receiving a big refund. The cash from the refunds will no longer drift into the market place.
While many hail the Tax Reform Act of 1986 as necessary and fair, it did throw the real estate market into a tailspin that required years to correct. It was well-intended and eliminated some questionable provisions, but the properties that were affected by those provisions could have been grandfathered and perhaps the collapse would not have occurred, a collapse that cost individuals billions of dollars.
NAR will, no doubt, seek a compromise to protect those who own houses and, of course, those who sell properties, a group also known as its membership.
Sale of the Week
Anyone interested in selling a home for $3,850,000 can follow the recipe created by the sale of the home at 4400 Franklin Road. The ingredients are important.
Start with a 3.23-acre lot on Franklin Road, then add 7,635 square feet of structure, preferably one inspired by the famed architect Frank Lloyd Wright.
It seems Paul Simon wrote a song about this Wright fellow, who must have been an aspiring singer. Paul Simon says the two of them harmonized till dawn occasionally, and Simon seemed to have enjoyed it, unlike many of his experiences with Art Garfunkel.
Simon also made a reference to architects the song, so Wright took a crack at that, as well. Simon wrote in “So Long Frank Lloyd Wright” that “architects may come and architects may go,” same as duet partners, I suppose.
This house was so special that it took a trio to list it, beginning with a somewhat-vocal duo of Lisa Fernandez-Wilson and Laura Putty Stroud, both of whom have significant ties to the music industry and architecture, just like Simon and Wright.
Stroud and Fernandez-Wilson said this is a Frank Lloyd Wright-inspired design. Tim King, the King of French-King Fine Properties, was the co-list. French must have been given the Garfunkel treatment on this one.
So, there you are on Franklin Road with your 3,23-acre lot and a 7,000-plus-square-foot home. You need to add a swimming pool with a pool house. Before adding the hardwood floors to the pool house, hand scrape the hardwoods.
In the master bedroom, install an OH MEI MA suspension lamp, no relation to Yoyo, but seasoned by Ingo Maurer. Drop in a Kohler Escalade tub and a dollop of teak over the custom floating vanities. Marinate the cabinets in Sapele and install in the kitchen and the bathrooms.
Preheat for $3,950,000 for 164 days and summon Carrie Zeier of RE/MAX to deliver the final ingredient – the buyer. Toss the property and the buyer and let both sides simmer until it closes.
Richard Courtney is a real estate broker with Christianson, Patterson, Courtney, and Associates and can be reached at email@example.com.