December 28, 2017

Republican Tax Plan: Screw You, Blue States!

Everyone hates paying taxesThanks to Burbed reader Real Estater for suggesting this as a topic for discussion.

Let’s review the many ways the new tax plan is gunning for Silicon Valley, Hollywood, SF, and all the engines of prosperity California provides.

By limiting SALT (that’s State And Local Taxes) deductibility to $10,000, every homeowner who bought more recently than 1987 just got a kick in the Schedule Effing A. And with that top bracket of 13.3% the most compensated will notice a corresponding Federal tax increase as well.

Next, what will this do to real estate prices? Only $750,000 of mortgage is now deductible. What can you get for around $950,000 (assuming a 20% down payment) in the Bay Area? Certainly not the luxury homes the angrybois on social media imagine. Maybe a crapbox in South San Jose? A condo in Santa Clara? A sleeping bag under the porch in Menlo Park?

And what will happen when the powerhouses of the US economy start fizzling as blue states start having serious budget issues?

There’s plenty to discuss, so have at it.

Comments (4) -- Posted by: madhaus @ 6:31 am

4 Responses to “Republican Tax Plan: Screw You, Blue States!”

  1. gallileo Says:

    Everyone knows that Bay Area real estate always goes up, so the only effect the new tax-scheme will have is to push prices up more quickly.

    More seriously, depending on how deeply into the AMT you are, these changes may not affect you. Many Silly Valley people are, especially those in Menlo Pork and Shallow Alto.

    There are several tax-change calculators on-line, here is one:

    https://www.marketwatch.com/story/the-new-trump-tax-calculator-what-do-you-owe-2017-10-26

    Many one-percenters will see only minimal changes due to the AMT making all of the rest irrelevant–and who in the Bay Area isn’t a one percenter?

    So it is hard to predict exactly what it will do to home prices.

  2. madhaus Says:

    I think we’re going to see a cratering (or at least a sagging) in the $1-2M range. Below that most if not all of the mortgage is covered, and above it, you’re comfortable enough to pay cash if you have to.

    We shall see, but you raise an excellent point about AMT.

  3. nomadic Says:

    Thanks for the link, gallileo. Looks like I’ll be getting a nice cut thanks to the changes in AMT. I didn’t get any benefit from property tax deductions anyway. There are a lot of people in Silicon Valley in the same income range, but most of them probably don’t realize the deduction cap doesn’t affect them (so the change might deter a few from buying). IMO, the only wild card is the lower cap on mortgage interest deductions.

    So, in spite of the tax savings for me, I still think this bill is very wrong and bad for the country.

  4. Real Estater Says:

    I hope all of you prepaid your April property tax payment by Dec 31st 2017. If so the Republicans will not be able to take any extra money from you.


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