The new tax laws have put home owners in New York state into a state of near panic. Many who live in low tax states can not fatham how much this impacts the markets of around 10 high-tax states where the services are great, our schools are they envy of much of the country, but the tax bite is high.
What do changes in the tax code mean in Westchester NY?
Here in Westchester, the cap on SALT (state and local taxes) deductions is a real problem. Home owners in New York rely on itemization to make their tax burdens bearable. However, for most people in Westchester, the property tax bite usualy well exceeds the $10,000 cap that has been placed on the SALT deduction. This also means that their entire state tax bite is no longer deductable at all.
Yes, the marginal tax rates have been adjusted, but itemizers have also lost the personal exemption, which, if you have a couple of children, is a very large deduction. Itemizers don't get a larger standard dedcution to offset that loss. The burning question for each homeowner is whether the lower marginal rates will offset the loss of these other deductions. The answer is that some living in co-ops and condos might break even. A few, who own studios or small 1 BR units, may even do a bit better. But almost anyone in a single -family home is going to have a tax increase.
It still won't make renting any better. Rents will go up the minute your landlord gets his tax bill.
Bottom line: this is going to hurt people across the board in NY. There is no way around it.
What about home improvements?
Having just read an excellent article by Anita Clark on home expansion projects, I had to take a moment to think about what home expansion now implies for a homeowner's tax burden. It's not a trivial issue. This is particularly true of homes that expand their living space. Adding on a second floor to a ranch house was a no-brainer before the new tax reform. Now, I'm not so sure.
I was took a look at recent sales in White Plains, NY and looked at the differences in taxes. Now granted, the property tax system is more than a bit Byzantine. Nothing is neat and tidy. A home with an old kitchen and bath will be taxed less than one with full renovations. There are other factors like neighborhoods, property size, decks, bonus rooms and other amenities.
However, when I looked at homes between 2000-3000 sf, the median taxes in the median price range were about $14,400. When you went to 3000-4000 sf that rate went up to $19,800. OUCH!
You can note that even in the 2000-3000 sf range the property taxes alone exceeded ths SALT cap by over $4000. But that extra $5k on the tax bill of those with larger homes has got to hurt a whole lot more when you can't deduct any of it.
For those in lower tax states whose jaws are dropping at the cost of living, White Plains happens to be known for its LOW property taxes. So just imagine what this is like in surrounding towns. They are much higher elsewhere in the county.
Renovating a home to make better use of exisiting space might be a plan...
This might indeed be the best way to go. We are living in an area where less is more. Homeowners who max out the best possible use of their existing space might actually get top dollar over those who simply expand their footprint. We have been seeing a trend in this direction for a while, and for people in higher tax areas, the new mantra may be "less is more".