Tax changes in the new 2018 tax law is affecting much of how we need to think about our financial lives. With this in mind, urban.org just posted a great article which goes into some good depth on how one would decide if they should rent or buy. There is a great chart (below) that shows the break even points for different income groups, and it indicates that the new tax law reduces the incentive to buy in a market that is already very seller friendly.
What does this mean for you? It completely depends the size of your deduction and if you ever itemized. As you can see in the charts below the standard deduction will be much more in 2018.
2017:
| Std Deduction | Single $6,350 | Married Joint File $12,700 |
| Std Deduction | Single $6,350 | Married Joint File $24,000 |
If you would still be able to itemize then you wouldn't lose this incentive to buy over rent as it would be deducted just as it was before, but if you move from the itemized to standard return, you would lose this as an incentive to buy. Most people used to think of the interest/property tax deductions when they weighed the financial implications of buying a home. With the new changes most people that make under $100k a year, this has now changed the formula. Your incentives to buy have to be based on future appreciation, location, desire to own the property, and other intangibles.
On the flip side, it might extend this crazy market for homes under $200k that we are seeing today (at least in our market here in Texas). It might even make it worth buying an investment property if you can actually find a good deal.
Feel free to leave your opinions in the comment section below.
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