SILVAR. How Tax Reform will Affect BA Real Estate


I take it back. I overlooked the fact that income tax is paid by everyone including renters. Hence my calculation is incorrect. Unless we know the average property tax we can’t figure this out.


Is the average SALT deduction for the whole population? Since at least half of the people have lower income and don’t even itemize, the $32k average could mean $64k for those who itemize


Good news is that state/local tax increase will be less possible now. Maybe the state and local government will curtail spending and even consider to cut state income and property taxes.

Also SALT was almost repealed in 70’s, but NYC rich guys lobbied away. This time it happened too fast for that lobbying to happen.

"Even if most rich New Yorkers stay put, local politicians could find it harder to raise taxes to pay for services. Mr. de Blasio, for example, has called for a tax on millionaires to help fix the city’s subway system. Mr. Murphy, the New Jersey governor-elect, wants a similar tax for public schools.

Without the state and local tax deduction, those plans could face more opposition. Already, top Democratic lawmakers in New Jersey have hinted they might back away from supporting Mr. Murphy’s millionaire tax if the deduction is repealed."


Average is pretty useless. How about a typical homebuyer’s SAlT deduction situation today?

Assume a 400k income and 2.5M buyer, and a 200k income and 1.5M buyer


Time to take down the liberal tax and spend state Democratic machine…Blame Trump all you want, but the nightmare of California’s taxes is homegrown…


I somehow can’t imagine someone with 200K income buying 1.5M home. May be a $1M home??


I have done it with less income.
A $1.5m home in the RBA is a starter home.
The BA will be hurt by this new tax law


That’s like saying “I can’t imagine someone in the upper middle class buying a starter home in the Bay Area”

and that is the point indeed. In my opinion, this is unsustainable without foreign cash money seeking safety and/or the promise of significant future appreciation.


Re-read the entire post, Assume you pay $33000 or $39000 SALT, you are likely to pay additional taxes.

Current Itemized = SALT (55%)+MIRD(45%) or Standard deduction (12xxxx)

Future Itemized = MIRD(45%) or Standard deduction (24xxxx)

For 1M home,800k loan, assume 4% rate , interest portion is 32000
SALT (san mateo) = 39000

Now current Itemized deduction = 39000+32000 = $71000 vs 12600

They may hit AMT as the deduction is high and get reduced to itemized appx 52k level (rough calc)

Future itemized = 32000 vs 24000, they will never hit AMT, but may pay additional income tax almost 10k tax even after reduction in personal rate.


100% true. They won’t realize until the file taxes in 2019. By that time mid elections are over !!!


Curious if you think this bill will benefit flipping if you hold for a year or more for the 15% rate.
I have always been a flipper.
I switched to buy and hold 4 years ago
Now instead of paying maybe 35% on rental income,
I am thinking of selling at 15% cap gains rate

Am I going to pay less tax with this strategy?


Actually I think that the after tax income may stay the same or the change is minimal in this case.

He can still get 10k property tax deduction. So his new total deduction is 42k and his AMT limited old deduction is 52k. With a 10k less deduction, the extra tax is about $3000.

However, the new lower tax rate can easily give him $3000 or more tax cut.

In total, his after tax income would be the same or better.

If this is the typical homebuyer, we can conclude that the tax reform should not affect the home affordability for the typical home. High end will have the impact but again, high end people will have more devidend income, more capital gains due to Corp tax cut. Low end taxpayers will get the tax cut. So low end home wil get a boost, middle end neutral, high end uncertain.


You may want to S-corp. Talk to your CPA.


But if I decide to hire management companies as I age I don’t know if an S Corp will work…
Besides flipping is fun. Being a landlord is drudgery…


I don’t see any reason why it wouldn’t. The only hard part is if you want to have a regular mortgage on properties and run your business as an S-corp. I’m pretty sure a CPA could get creative where you own the properties and the S-corp shows all the profits as a property manager.


Some say they are seeing the tax legislation’s effect on New York even before it has become law.

“We’re seeing an influx of buyers who specifically said they were looking to move because they will not be able to deduct city and state income taxes,” said Louise Sunshine, a former Trump executive who is now a strategic adviser to Fort Partners, the company that recently opened the Four Seasons Hotel and Residences in Fort Lauderdale, Fla. “We’ve been selling so many residences to New Yorkers now. That’s picked up in the last few weeks.”


Is it retired people moving? It’s hard to move from NYC to FL unless either your job moves or you get a new job. I think those NYC people would be shocked at how few comparable jobs there are in Fort Lauderdale. If you’re rich enough and your work is flexible enough, I could see a booming industry for states with no income tax. People will want to buy a “primary” residence in them and claim they live there most of the year.


Four seasons condo most likely sells to retirees or rich people who does not rely on paychecks. These people will establish a primary home in Florida and escape the state income tax.

NYC, LA will lose more rich people. Bay Area’s rich people need to go to work every day so most of them are trapped here. Movies stars and investment gurus can live anywhere, google executives can not but they can move to Seattle.


I had exactly same question about SALT deduction since I get 0 SALT deduction due to AMT.
Then, I realized that if income is higher than 700K/year or so, AMT would be gone due to higher tax bracket.
I suspect those high income people probably push the average a lot.
Otherwise, average SALT deduction in Santa Clara and San Mateo County is too high.
Wish they published source of data to verify their numbers.


Exactly. I think that most of Bay Area people will actually get a tax cut. I’m surprised about the claims that many people will pay more tax. Is it a false claim to make people hate T even more?

But even though most of us will pay less or the same tax, tax free states are now more attractive. Basically moving to tax free states now can save you more money, even though your tax bill will be the same or less.