2018 Then and Now Real Estate Tax Reform Changes

Currently Proposed Tax Plan breakdown

Here's a breakdown of the proposed tax plan that would affect the Real Estate Market. Officially known as the "Tax Cuts and Jobs Act" Bill which passed the House on 11/16/17 and now sits in the Senate for Approval. Passed by the Yeas and Nays: 227 - 205.

Proposed tax plan rates and income brackets

Tax Rate - Single Filer - Married Filing Jointly Filers

12% Up to $45,000 - Up to $90,000

25% $45,001 to $200,000 - $90,001 to $260,000

35% $200,001 to $500,000 - $260,001 to $1 million

39.6% More than $500,000 - More than $1 million

Standard deduction for married couples to be $24K, currently $12,700. For unmarried individuals $12K, currently $6,530. It would also repeal the alternative minimum tax.

Some of the changes to take place that affect the Real Estate Market:
1. Slash the mortgage interest deduction in half from $1 million to $500,000. 2. Elimination of the deduction for state and local income or sales taxes not paid or accrued in a trade or business,
3. Property tax deduction will be capped at $10,000
4. Requirement for taxpayers to live in a home for five of the past eight years in order to exclude capital gains from the sale of that house. Currently, it’s two of the past five years.
5. The limit on the capital gains exclusion would stay at $500,000 for joint filers and $250,000 for singles but would begin phasing out for taxpayers with incomes above $500,000 for joint filers and $250,000 for single filers. You could use the exclusion only once every five years instead of once every two years.
6. no more deductions for moving expenses
7. no more property and casualty write-offs
4. The proposal will double the estate tax exemption to roughly $11 million, from $5.49 million, meaning families can avoid paying taxes on large inheritance. And it eventually repeals the estate tax altogether, phasing it out entirely in six years

Business Changes:
1. a permanent cut to the corporate tax rate to 20% from 35% —
2. Small businesses and sole proprietors will be taxed at 25%
3. allows increased expensing of the costs of certain property

It also plans to expand the child tax credit to $1,600 from $1,000 and add a $300 credit for each parent and non-child dependent, such as older family members, though that credit would expire after five years. Those making less than $24,000 will pay no income tax.

From the Government website:

https://www.congress.gov/bill/115th-congress/house-bill/1/all-info#latestSummary-content

Summary of the "Tax Cuts and Jobs Act"

This bill amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses.

With respect to individuals, the bill:

replaces the seven existing tax brackets (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%) with four brackets (12%, 25%, 35%, and 39.6%),
increases the standard deduction,
repeals the deduction for personal exemptions,
establishes a 25% maximum rate on the business income of individuals,
increases the child tax credit and establishes a new family tax credit,
repeals the overall limitation on certain itemized deductions,
limits the mortgage interest deduction for debt incurred after November 2, 2017, to mortgages of up to $500,000 (currently $1 million),
repeals the deduction for state and local income or sales taxes not paid or accrued in a trade or business,
repeals the deduction for medical expenses,
consolidates and repeals several education-related deductions and credits,
repeals the alternative minimum tax, and
repeals the estate and generation-skipping transfer taxes in six years.
For businesses, the bill:

reduces the corporate tax rate from a maximum of 35% to a flat 20% rate (25% for personal services corporations),
allows increased expensing of the costs of certain property,
limits the deductibility of net interest expenses to 30% of the business's adjusted taxable income,
repeals the work opportunity tax credit,
terminates the exclusion for interest on private activity bonds,
modifies or repeals various energy-related deductions and credits,
modifies the taxation of foreign income, and
imposes an excise tax on certain payments from domestic corporations to related foreign corporations.
The bill also repeals or modifies several additional credits and deductions for individuals and businesses.

UCLA Students announce an attempt to create their own City Council amidst housing disputes

The proposed 20 story student housing facility on the corner of Gayley and LeConte has been blocked by the Westwood Neighborhood Council prompting UCLA Students to split from the Council and attempt creating their own. 

This is an ongoing argument that almost every neighborhood fights with now, "density".  The Westwood Neighborhood Council  approves having the 20 story proposed building divided among four existing UCLA sites, but students object stating that would hinder any future development if ever needed by utilizing all four sites.

Students rights versus homeowner rights - which one to prevail?  One item to consider is that The Wilshire Corridor also knows as the Golden Mile, is a two mile stretch of luxury residential high rises on Wilshire Boulevard in Westwood with buildings over 20 stories.

Many homeowners feel the students are "transient" therefore, they come and go after college completion, therefore their rights don't hold as much value as a homeowner paying property taxes.  Many UCLA Students current and alumni feel the value for these homeowners has increased due to being within the UCLA vicinity.

UCLA students feel the need for student housing is overwhelming and a need that should be a priority as they are the future.  There is also much debate as to Westwood in general with a feeling of being "rundown", no new restaurants, bars or local hangouts that the students can enjoy walking distance.  READ MORE

The proposed neighborhood council would be bounded roughly by Verteran Avenue to the west, Sunset Boulevard to the north, Hilgard Avenue to the east, and go as far south as Ohio Avenue. Courtesy of Michael Skiles. 

Google Maps

Culver City Steps major mixed use development finally breaking ground

During a time when most neighborhoods are fighting big development, Culver City Mayor welcomes this downtown construction to be known as the "Culver Steps" due to the architectural design of cascading landscaped terraces and seating down the side of the building. https://la.curbed.com/2017/11/9/16625028/culver-steps-development-downtown-renderings

City of LA 311 smartphone app capabilities

Did you know you can download the City of LA 311 app on your smart home? Did you know all the things you can do with it? Report dumped items, graffiti, potholes, pretty much all the items that you have to report to the City and your phone will have a GPS to give the location upon sending. Thank you LEAD Officer Maria Gray of our LAPD for constantly giving great neighborhood tips.

Los Angeles High End home Sales have slowed down, but the $1.5M range soars

The High End market in Los Angeles has slowed down even though inventory remains tight. However, the market in the the $1.5 price range continues to soar with not enough inventory to meet demand - more importantly, it marks the 21st consecutive quarter where prices have gone up.

The upper 10% of homes sales is the defined "High-end or Luxury" single-family home and according to these statistics dropped to an average price of $11.67 million in the last quarter which was a 6.7% decline.  READ MORE

Sunset Park in Santa Monica still selling over asking

In analyzing the 80 homes that sold between 7/1/16 - 6/30/17 for the Sunset Park Area in Santa Monica, 57.5% sold under 30 days and above asking at 104.79%. The median sold price was $1,723,000 which is a $1,029/sf for a 3bd/2ba 1,733sf home on a 6,623 lot.

Today, there are only 9 homes available for sale in Sunset Park and 4 are currently in escrow.  With shortage of inventory and homes selling over asking, Sunset Park Real Estate is holding strong. Link to MLS 9 homes

Visit www.lehoamiller.com for more information or click here.

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