The recently passed 2017 Tax Cuts and Jobs Act introduces some of the most significant changes to our tax code in decades. One of the biggest changes is that the standard deduction has nearly doubled.

Some deductions, credits, and exemptions have been eliminated, such as moving expenses. Previously there was no limit on the deduction for state and local taxes related to property and sales taxes. However, it is now capped at $10,000, significantly impacting homeowners in areas with high state and local property taxes. The cap on mortgage loan deductions is now $750,000 (down from $1M) and there is no longer a deduction on home equity loans.

This directly affects real estate as less people will itemize their deductions and the incentive to itemize for higher priced housing markets (such as Steamboat) is no longer present. At the macro level, areas with lower property taxes will become far more attractive.

Another significant change is the reduction in the corporate tax rate from a 35% maximum rate to 21%. This looks to have had a positive impact on the stock market as stock prices have been on a tear. Steamboat is impacted by this more than other communities because nearly half of the properties here are owned by second homeowners. Second homes are often bought with discretionary income. Also, typically when one asset class appreciates significantly (ie the stock market), investors often rebalance their portfolios. Perhaps investors will take profits in stocks to diversify through more real estate investments.