The recent tax reforms in New York City has worried all of the residents, as they wonder how it will affect their real estates. One prediction that has everyone particularly concerned is when Moody said that New York City will experience the sixth largest decline in prices due to these reforms. Everyone wants to know what to do to avoid being affected by these new rules.
Changes made by the Reforms
Before knowing anything about the effects of the reforms, you should be aware of what changes these reforms have made. The maximum deduction for local, state and property taxes has now changed to $10, 000 after these laws have come into play. This means that now people who used to be able to afford property in New York City can no longer deduct their property taxes.
For people who earn income of $500,000 their tax bracket is now 37%.
All the increased tax amount does depend on the value of property. More the property value, more will be its tax. This means that the people effected most by these reforms are those who can afford the higher end of marketing.
Effects of the Reforms
These reforms will massively effect affordable housing done by city programming. There will be a limit to tax borrowing, and this will lead to the city not being able to refinance any bonds at a lower interest rate.
It is estimated that $2.6 billion will be lost in annual funding due to this new plan, and this will effect mainly middle class housing.
The reforms will also cause problems in the rental market, as tenants will start losing their mortgage interests. New York City resident will start to find renting easier and more affordable than buying, which will lead to more competition in the rental market.
For owners of renting units who live in the same building as the properties they are renting out, they may start transferring their property tax onto their tenants, which will make the tenants overall rent higher.
Buying Hiatus
The ultimate outcome of this situation is there will be a lull in the buyer’s market. With the potential mortgage interest deductions and limitations put on property tax, buyers will not be able to afford more property to invest in.
When this happens, after some time it will lead to a massive tax overhaul, as more houses and properties are built and there is no one who is able to afford to buy them. This will cause a lot of problems in the New York Real Estate world at a large volume. The good news about these reforms however, and what gives the people of New York hope is that they are not finalized, and there is still room for modification, in which the Americans are praying they are given more benefits. It is advised though that anyone in the industry, including buyers, sellers, and real estate managers should keep a close eye on any development so they can plan accordingly.
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