Even though the sweeping tax reform bill was signed into law on Dec. 22, the massive document is so dense that even seasoned real estate professionals aren’t entirely sure what it will mean for Miami.
While some of the bill’s real estate provisions are clearly delineated, other portions are “riddled with errors,” said Dustin Stamper, director of the Grant Thornton Washington National Tax Office.
Those, and “handwritten notes on the margins,” are indications that the bill was written in a rush, Stamper told attendees at a Wednesday breakfast hosted by the real estate committee of the Greater Miami Chamber of Commerce. As a result, he expects the law will undergo technical corrections and other tweaks in the weeks to come.
“It’s going to be the wild west in the tax world,” Stamper said.
These impacts are clear:
▪ The limit for the mortgage interest deduction will be lower. Previously, homeowners with loans of up to $1 million could write off the interest of their mortgages. Now, the amount has been lowered to $750,000. (The change will only affect new loans; existing loans will be grandfathered in). The deduction also applies to second homes. (Industry pros think this could impact the sales of homes between $750,000 to $1 million. But they differ in how important that market is.)
▪ Deductions for income, sales and property taxes, which were previously unlimited, are now capped at $10,000. But the new cap could lead more residents of states with high property values and state income tax to South Florida. That boost could help to offset an expected slowdown of new sales of homes priced within the $750,000 to $1 million range, whose interest can no longer be deducted.
Vanessa Grout, president of CMC Real Estate, developers of the 64-story Brickell Flatiron luxury condo currently under construction in downtown Miami, said she has already seen the inbound website traffic from New York buyers triple in volume within the past month. Three penthouses in the building, ranging in price from $1.5 million to $3 million, were bought by New Yorkers in the first two weeks of January alone, she said.
Some of the issues pondered during the hour-long conference: How the bill will impact estate taxes (probably not much, speculated real estate pros); whether corporations will be encouraged to stop holding their investments overseas (yes); and the disconnect between what the bill will deliver and what taxpayers expect. (Stamper said nearly every income bracket will receive a tax cut, despite the caps on deductions.)
Wednesday’s pow-wow between real estate professionals is just one of many more to come, said Arthur “AJ” Meyer, chair of the Greater Miami Chamber of Commerce and vice president of business development at the ANF Group construction/development firm.
“This is a complicated bill, and it’s going to take a while for everyone to get a good grasp on all its parts — including professionals,” said Meyer, who organized Wednesday’s conference.