The New Tax Plan: When It Comes To Real Estate, Who Wins And Who Loses? - Part 1 of 5

We have all heard a lot about the new tax plan, which was approved and sent to President Trump to be signed on Wednesday, Dec. 20. Depending on where your politics lie and your individual financial situation, you may have a positive or negative take on the tax bill. But how does it impact real estate? That also depends on a few things, like where you are buying a house, how much money you have, and what you intend to do with it.

"The new tax plan has been framed as a deathblow to the American dream by some real estate professionals and groups, who warn of falling home prices, a new generation trapped in renting, and an exodus of residents from the highest-cost cities and states," said Realtor.com. "But are these fears surrounding the new, lower cap on mortgage interest deduction - and the incentive for taxpayers not to use it - overblown? Or are there indeed big repercussions to come? That all depends on whom you ask - and where they live."

We're breaking down the winners and losers as it relates to real estate.

Everyone: Winners-ish

The mortgage deduction has been among the most talked-up portion of the tax bill, especially in relation to the standard deduction. The new tax code doubles this deduction; new amounts are $12,000 for individual filers and $24,000 for married couples who file jointly. On the surface, this seems like great news. However, the elimination of other deductions that formerly incentivized itemization may mean more tax filers go the standard route. So, is that a bad thing?

According to the Pew Charitable Trusts, most taxpayers - as many as two-thirds - don't itemize their tax bills anyway, which means they aren't claiming the deductions that are available to them.

"On a scale of 1 to 10 on if interest deductibility is going to have a big impact on housing, it's a 2," Ken Johnson, a real estate economist at Florida Atlantic University in Boca Raton, told Realtor.com. "It's not clear that it will hurt housing. But it is clear that it's not going to help."

According to the New York Times, "Today, a little under half of American homes are worth enough to justify itemizing mortgage interest and property taxes. Under the tax legislation, that figure would fall to close to 14 percent.

The new limit on property tax deductions makes the "to itemize or not to itemize" conversation even more muddy.

"Can I still deduct my state and local taxes? Up to a point, and you'll have to make a choice," said CBS News. "Filers will be able to write off the cost of state and local taxes, up to $10,000. And they must choose from among sales, income and property taxes for the deduction, instead of being able to deduct all local taxes."

This is most relevant to those who live in "states with high income and property taxes," said the Motley Fool. "Whether or not state and local taxes (SALT) should be deductible has been a hot button issue in this year's tax debate. The GOP's final bill allows taxpayers to deduct only up to $10,000 of state and local property taxes ($5,000 for married taxpayers filing a separate return). Under current tax law, there is no limit on how much state or local taxes can be deducted from your federal taxes. The state and local tax deduction is important because it is frequently one of homeowners' largest deductions outside mortgage interest. As it stands today, the mortgage interest tax deduction primarily benefits people who incur substantial mortgage interest on a residence in a state or municipality with relatively high income and property taxes. That's because the mortgage interest tax deduction only matters if your total deductions exceed the standard deduction."