Tax Bill Changes and the Real Estate Market on Long Beach Island
For months we have been calling it a tax bill. Though we have covered the proposals, we have been careful not to predict what we would see in the final version. Today, the tax bill is law and, though we are aware of the major provisions, it is a very complex law and many of the details will be coming out in the coming days and weeks. How the tax bill changes and the LBI NJ real estate market will interact is yet to be seen. As a matter of fact, we would not be surprised if there are a series of technical amendments in the near future intended to fix and/or clarify certain provisions as they are uncovered.
Tax Bill Changes and the LBI NJ Real Estate Market
Today, we will not discuss the specifics of the law and the impact on the LBI NJ real estate market, but the possible macro-effects of the law’s implementation. We have already seen one major positive effect. As we have mentioned previously, the major stock market rally America has witnessed in the past year was, at least partially, a direct result of the possibility of a tax cut for corporations. Theoretically, if you lower the tax liability of companies, their profits should increase, and they will be more valuable. But even this obvious effect is in question with regard to the future. Now that the tax law is passed, does that mean that the stock run will continue, or has all of the good news been built in to the valuation of stocks?
Another obvious effect of the law should be to boost the economy. If tax rates are lowered for most, this will give both individuals and corporations more money to spend. This leads to two questions. How much will the economy improve? Plus, since we are already near full employment levels, if the economy improves significantly, might this hotter economy increase inflation? The possibility of higher inflation would also bring the threat of higher interest rates. Again, this is not a prediction, but a question that will be answered as time goes on. Finally, the effect of the tax law on real estate, as a result of the changes in the standard and itemized deductions, will be another significant question we will cover as the details emerge.
Taken as a whole, at this junction there seems to be only one possible negative with the tax bill and the Long Beach Island real estate market: the limit on tax deductions to $10,000. While this is a concern often raised to me by prospective buyers, it is important to remember that LBI is a second home market made up mainly of discretionary, second home purchases. Most of the buyers in the LBI real estate market are “well to do” and could see the loss in deductions negated or minimized by tax cuts. Furthermore, even if there is a net out of pocket cost, it should be small enough that it does not greatly impact the buying patterns of buyers on Long Beach Island. In any case, we will have to keep an eye on the changes taking place and evaluate how the tax bill changes and the LBI NJ real estate market interact.
By : Nathan Colmer | The Van Dyk Group
Cell: 609-290-4293 | Office: 800-222-0131 | email@example.com
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