As Joseph R. Biden begins his term as the 46th President of the United States of America, many are wondering how the new administration will affect the real estate industry. The changes discussed below are, of course, speculative until Biden’s tax plan and other policies are officially implemented, but let's take a look at some of the possible outcomes.
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Real estate activity has increased in several urban areas and it's expected that the "Biden Bump" and a renewed consumer confidence in the market will promote a similar uptick nationwide. The stronger sense of stability in the U.S. economy, along with the promise of vaccines to curtail the pandemic, builds hope for a more "normalized" way of life on the horizon. Biden presented a new stimulus package, passed by Congress, with even more assistance to individuals and small businesses, as well as federal assistance for urban recovery, especially for areas like New York and Seattle that were denied funding under the Trump Administration.
Biden’s tax policies will include a lot of changes, such as an increase in the tax rate from 37% to 39.6% for those making 400K+ a year, as well as additional social security taxes for that same bracket. It’s likely we will see an increase in capital gains taxes as well, particularly for investors in that same 400K+ range. The new administration may also remove SALT (State and Local Tax) caps (which limit itemized deductions for mortgage payers), increase Estate taxes, and lower the exemption level from 11.58 million to 3.5 million, which could increase taxes upon death when coupled with the increase in capital gain taxes.
The number of First-Time Homebuyers decreased from 33% to 31%, according to the National Association of Realtors 2020 Profile on Home Buyers and Sellers, but the new administration could help improve these numbers by proposing a $15,000 tax credit for First-Time Homebuyers, and increasing federal funding for low-income housing projects.
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If passed, these policies will shore up real estate as a pillar of our economy. As interest rates remain low, and First-Time Homebuyers receive tax credits, and affordability increases in communities, housing could be a major catalyst toward overall economic growth and recovery.
Written by Briana Aragon, Marketing Coordinator
And Ronni Aragon, Owner/Broker