How will proposed tax reform legislation affect Miami real estate?

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The U.S. Senate passed tax reform legislation early Saturday morning, following a marathon voting session overnight. The bill was approved just before 2 a.m. and will head to conference where House and Senate negotiators will work out the differences in their bills. It has been a hot topic in recent months and it is very probable that you have heard how it might affect real estate as a whole – but what about real estate here in the state of Florida – even Miami?

 

First, it is important to understand what proposed aspects of the tax reform legislation affects real estate.

  • Home Mortgage Interest Deduction: Senate retains the current limit for the deduction to interest paid on the first $1 million of the loan. House cuts the limit in half to $500,000 for new home purchases.
  • Property Tax Deduction: Both House and Senate limit itemized deductions for property taxes capped to the first $10,000 paid.
  • Tax-Free Gains: Under the current tax code, sellers filing jointly can exclude up to $500,000 of gains from a home sale (up to $250,000 for single filers) tax-free, provided they have lived in and used the property as their principal residence for an aggregate of two years of the preceding five. To qualify under the new Senate bill, sellers would have to live in their homes for five of the preceding eight years, and they can only use the provision once every five years.
  • Deductibles:
    • Deductibility for second or vacation homes – eliminated
    • Deductibility for home equity loans – eliminated
    • Deductibility of moving expenses – eliminated

How many in Florida might the tax reform affect?

It is obvious that the proposed changes will have an affect on the cost of homeownership. The financial limitations will be felt by both affordable and luxury property buyers. According to NAR, of the approximately 4,857,000 owner-occupied houses in Florida in 2016, 57 percent had a mortgage. 9.4 percent of the housing units with a mortgage had a value higher than $500,000 while 2.6 percent of the owners paid over $10,000 for real estate taxes. Vacation homes accounted for 9.9 percent of the housing units in Florida. Furthermore, in 2016, 14.9 percent of homeowners in Florida have lived in their homes for 2-4 years. These owners will not be able anymore to take the exemption based on the proposed tax reform legislation.

How many in Miami might the tax reform affect?

Now, let’s take a closer look at our local market here in Miami. For some, their primary concern lies with the House’s proposed mortgage interest deduction, capped at $500,000, rather than $1 million, is that it will make homeownership more expensive for individuals who fall within that category. But how many buyers will this proposed change affect in Miami? According to Ron Shuffield, President at EWM Realty International, the combined sales of single-family, condos and townhomes priced between $500,000 and $1 million represented 12 percent of the buyers purchasing in Miami-Dade County in Q3 2017. The most recent stats show that 37 percent of homes sold between $500,000 and $1 million are cash purchases, he said, reducing the number of home buyers actually being affected by this proposed legislation.

What to expect from Miami’s real estate market after the changes are implimented.

Homeownership in Miami is expected to get a bit more expensive. Yet, it is still unclear what will happen to home prices once the effects of the tax reform are priced in. That being said, Miami’s real estate market is unlike most other markets in the U.S. There is, and will be, a great demand for housing in Miami from many buyers here in the U.S. and the ever-increasing international client base. In fact, the plans propose the removal of state and local tax (SALT) deductions which might increase the continued interest and migration from higher-tax states, such as New York, to Florida.


The Monica Betancourt Group, “MBG”, is a group with members who are  fluent in not only several languages but also fluent in several different cultures. This fluency gives us a deep understanding of the expectations of both local and foreign buyers and investors.

Why MBG? We are a group that works as one 24/7. When one member lists a property or works with buyers, their individual work is augmented by the expertise and collective efforts of the group.

We understand. Our group understands Miami, and more importantly, we understand the wants and needs of international prospect customers. Many of us have lived abroad and have benefitted from the networks and connections formed as ex pats. These ties are just part of our international reach. We go the distance.

MBG knows that many prospect customers may live on the other side of the world. To successfully close business with these foreign customers we are ready to go the distance… literally. We have direct ties in Hong Kong and Latin America, and make a point to travel abroad to sell Miami to the world.

Most Real Estate firms will tell you that they are experts in the Miami area…and so are we. However, there is a difference between us and other firms. We know what international buyers look for and what international investors want. Our cultural diversity gives us an understanding that is much deeper than that of other agents. From Latin America through Europe to Asia, we will bring the Buyers to Miami or bring Miami to the Buyers around the world.

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