Photo: Christian Abraham / Christian Abraham
Residents from the Black Rock neighborhood came out en masse to protest a raise in property taxes, during the Bridgeport City Council's meeting at Bridgeport City Hall in Bridgeport, Conn. on Tuesday July 5, 2016. High profile residents including former U.S. Comptroller General David Walker and former mayoral candidate Mary-Jane Foster were on hand to protest the hike as well.
lessResidents from the Black Rock neighborhood came out en masse to protest a raise in property taxes, during the Bridgeport City Council's meeting at Bridgeport City Hall in Bridgeport, Conn. on Tuesday July 5,
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Democratic candidate Howard Richman speaks during The League of Women Voters of Greenwich tax collector debate between incumbent Republican Tod Laudonia and Richman at Greenwich Town Hall, Conn., Tuesday night, Oct. 24, 2017.
lessDemocratic candidate Howard Richman speaks during The League of Women Voters of Greenwich tax collector debate between incumbent Republican Tod Laudonia and Richman at Greenwich Town Hall, Conn., Tuesday night,
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Stamford Mayor David Martin congratulates Norwalk Mayor Harry Rilling following the swearing-in ceremony for Rilling and Town Clerk Richard McQuaid on Tuesday, November 21, 2017, in the Community Room of Norwalk City Hall in Norwalk, Conn. Rilling was sworn into his third two-year term by Connecticut Governor Dannel Malloy.
lessStamford Mayor David Martin congratulates Norwalk Mayor Harry Rilling following the swearing-in ceremony for Rilling and Town Clerk Richard McQuaid on Tuesday, November 21, 2017, in the Community Room of
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Dwayne Hines looks at the Tax Sale postings in the Norwalk City Hall atrium in Norwalk, Conn. Tuesday, July 5, 2016. The The Norwalk Tax Collectors Office has collected $3.2 million in advance of the tax sale that will put properties that remain delinquent on the auction block. The tax sale is scheduled for Monday, July 18, 2016, in the Norwalk Concert Hall. Bidder registration begins at 3 pm; the rules of the sale are read at 4 pm, and the sale itself will commence at 5 pm.
lessDwayne Hines looks at the Tax Sale postings in the Norwalk City Hall atrium in Norwalk, Conn. Tuesday, July 5, 2016. The The Norwalk Tax Collectors Office has collected $3.2 million in advance of the tax sale
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2 Wild Goose Lane, Norwalk, Conn.
2 Wild Goose Lane, Norwalk, Conn.
Mayor Joe Ganim tries to keep order as hundreds of residents from the Black Rock neighborhood attended to protest a raise in property taxes, during the Bridgeport City Council's meeting at Bridgeport City Hall in Bridgeport, Conn. on Tuesday July 5, 2016. High profile residents like former U.S. Comptroller General David Walker and former mayoral candidate Mary-Jane Foster were on hand to protest the hike as well.
lessMayor Joe Ganim tries to keep order as hundreds of residents from the Black Rock neighborhood attended to protest a raise in property taxes, during the Bridgeport City Council's meeting at Bridgeport City Hall
... more
Coldwell Banker Residential Brokerage, whose regional headquarters are located in Danbury and shown here, has acquired two New Haven real estate firms, it was announced Wednesday, April 19, 2017.
Coldwell Banker Residential Brokerage, whose regional headquarters are located in Danbury and shown here, has acquired two New Haven real estate firms, it was announced Wednesday, April 19, 2017.
Photo: Chris Bosak / Hearst Connecticut Media
The on-the-market home located at 1452 Riverback Avenue in north Stamford, Conn. on Tuesday, Dec. 26, 2017.
The on-the-market home located at 1452 Riverback Avenue in north Stamford, Conn. on Tuesday, Dec. 26, 2017.
Photo: Michael Cummo / Hearst Connecticut Media
The on-the-market home located at 1452 Riverback Avenue in north Stamford, Conn. on Tuesday, Dec. 26, 2017.
The on-the-market home located at 1452 Riverback Avenue in north Stamford, Conn. on Tuesday, Dec. 26, 2017.
Photo: Michael Cummo / Hearst Connecticut Media
The garage and driveway of the on-the-market home (not pictured) located at 1452 Riverback Avenue in north Stamford, Conn. on Tuesday, Dec. 26, 2017.
The garage and driveway of the on-the-market home (not pictured) located at 1452 Riverback Avenue in north Stamford, Conn. on Tuesday, Dec. 26, 2017.
Photo: Michael Cummo / Hearst Connecticut Media
The on-the-market home located at 1452 Riverback Avenue in north Stamford, Conn. on Tuesday, Dec. 26, 2017.
The on-the-market home located at 1452 Riverback Avenue in north Stamford, Conn. on Tuesday, Dec. 26, 2017.
Photo: Michael Cummo / Hearst Connecticut Media
Home sellers in region await impact of tax package
With Connecticut home sales trending downward this autumn, all eyes in residential real estate will be on the January and February market as a harbinger of things to come in the spring under the new law that eliminates a major tax deduction for many homeowners.
Under the Tax Cuts and Jobs Act of 2017, many itemized deductions were eliminated that had been allowed under prior Internal Revenue Service allowances, replaced by a doubling of a standard deduction of $12,000 for single filers and $24,000 for joint returns. Those figures are pegged to inflation going forward.
Republicans set the limit on deductible mortgage debt to $750,000 for new loans, with current loans of up to $1 million grandfathered. The law also repeals a deduction for interest paid on home equity loans, except in cases where the loan is used to improve the residence rather than for other life expenses.
The new tax law allows homeowners to itemize deductions on up to $10,000 of state and local property taxes — for both single and joint filers — with SmartAsset calculating at just over $613,000 the assessed value of a Fairfield County home at which additional taxes would no longer qualify for the itemized deduction.
That was a market segment that was particularly strong in the past year in Connecticut as younger professionals eyed starter homes in that price range in the southwestern corner of the state.
“We … believe this is particularly detrimental to our housing market, as it eliminates many of the key deductions that are instrumental in the home-buying process,” said Michael Barbaro, president of the Connecticut Association of Realtors, speaking of the tax package as Congress readied to send a final bill for President Trump’s signature.
Between September and November in Connecticut, single-family home sales were off their totals of a year earlier by 275 units, as tracked by the Connecticut Association of Realtors, a 3 percent decline to just under 8,800 houses. That data comes even as Connecticut’s job market put up back-to-back declines in October and November while the country as a whole registered gains.
The bottom line
Earlier versions of the bill had contemplated another major change that did not make it into the final law: a stiffened restriction on a capital gains tax exclusion that has been applied to the sale of a principal residence. The bill had contemplated increasing the number of years a homeowner must live in a residence to five of the past eight years in order to take the tax exclusion, with the final law keeping in place the current requirement that a homeowner live in the house two of the past five years.
And the new bill has other changes affecting ancillary elements of homeownership, including the elimination of deductions on expenses incurred in moving into a new home; and a repeal of a 10 percent tax credit on the rehabilitation of buildings constructed in 1935 or beforehand, with the law retaining a 20 percent tax credit for work on buildings that have been certified as having historic significance.
The changes had drawn the opposition of the National Association of Realtors, which told its members home values will plunge more than 10 percent — likely by even more in higher-cost areas like Connecticut. Some in the real estate community are already predicting that will tamp down “aspirational” pricing of homes by sellers who have unrealistic expectations of what they can fetch in a sale. In the short run, that is good for buyers, but it is anyone’s bet how they will fare in the long run as the individual tax cuts hit their sunset in 2025, with Congress having eight years to assess the impact of the Tax Cuts and Jobs Act of 2017.
“The bottom line is that for tax purposes, owning a home would be treated the same as renting one for the great majority of Americans,” NAR wrote in its analysis of the House and Senate bills that led to the Tax Cuts and Jobs Act. “A tax reform bill that is projected to add $1.5 trillion to our national debt should produce very few, if any, losers. Unfortunately, it appeared that America’s homeowners and owner-occupied real estate in general were by far the largest losers in that legislation.”
Includes prior reporting by Macaela J. Bennett, Chris Bosak, Jordan Grice and Paul Schott.
Alex.Soule@scni.com; 203-842-2545; @casoulman
