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The Impact Of New Tax Reform On Real Estate

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Massive new tax changes are in the works. What will it mean for real estate?
Americans are facing an unprecedented shake up of tax breaks in the next few weeks. The new
tax plan aims to repeal a variety of very prominent tax breaks, and to ‘simplify’ income tax filing.
Unfortunately, this means striping away many very popular tax breaks, and many worry that it
could result in bigger bills, and less of a draw to buy homes.
Among the new proposed tax changes that are expected to come into play by 2018 are
eliminating the property tax deduction, mortgage interest deduction, and the ability to deduct
state and local taxes on federal income taxes. The one main break most expect will be left
untouched is expected to be the tax deferred and tax free benefits of investing for retirement
through a 401k or IRA.
This comes right amid fears of a coming stock market correction, and a highly priced stock
market which isn’t very attractive to investors. This has many big financial institutions and funds
looking for alternative investment opportunities in mortgage lending and real estate. At the same
time, homebuyers are already dealing with high residential property prices in many areas. They
may become even more expensive with fewer tax deductions to offset them.
This all may not only change where the best investment opportunities are, but how investors
choose to invest. With it becoming even more expensive live and buy homes in states like New
York, more may turn their focus on states like Florida which have no state income taxes. With
fewer benefits of owning a bigger and more expensive home, more may choose to be more
modest with their residence, and invest more in commercial real estate.
Individuals are likely to also find that investing more through their IRAs and 401k plans is
essential for keeping more of what they earn. With self-directed variations of these plans,
individuals can avoid the perils of the stock market and enjoy tax deferred or tax free gains,
while investing in private lending, real estate partnerships, and directly in commercial properties
in Florida. It may be a necessity if Americans want to avoid digging deeper in their pockets at
tax time, and want to get on track or ahead when it comes to building wealth and passive income streams for retirement.

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