What the New Tax Law Means for Real Estate in Central Ohio

Hey friends, happy new year! I hope you had a restful holiday season and are looking forward to 2018 being a great year. I took the last 10 days of the year off from blogging, and now I’m ready and raring to go. And I think a great place to start is to discuss the tax law changes that were enacted at the end of the year. There has been a lot of confusion about the issue, and I’d like to set some of it straight as it pertains to real estate, particularly in Columbus.

First, let me say that I am not a CPA, nor do I play one on TV. You should talk with your CPA for how the laws affect you specifically. That said, let’s begin. The tax law includes lots of changes, but there are three areas I’d like to discuss today: the capital gains exclusion, the mortgage interest deduction, and state and local taxes (SALT).

Capital Gains Exclusion

This is a topic that got lots of coverage as the House and Senate proposals were being discussed, and it caused a lot of worry for homeowners considering selling their homes in the near future. But before I get into what the new law says, let me start with a definition.

What is the capital gains exclusion, anyway?

The capital gains exclusion as it stands today (i.e., before the new law takes effect) says that a homeowner selling their primary residence, as long as you’ve lived in for 2 of the last five 5, you don’t owe any taxes on the profit you made on that sale up to $250,000 if you’re single, or $500,000 if you’re married.

What was proposed

The House proposed that this exclusion be phased out for single taxpayers with incomes above $250,000 ($500,000 for married taxpayers). The Senate proposal would have made the same change, as well as increased the amount of time you have to live in your home in order to qualify for the exclusion from 2 of the last 5 years to 5 of the last 8 years.

What the new law says

The new law retains the current law. There is no phase out of the capital gains exclusion on the sale of a qualifying primary residence, and the time period to qualify remains the same.

What this means for you in Central Ohio

The proposed changes would have been a potential take-away for some sellers, so this is a big win for homeowners who have been considering a move.

Mortgage Interest Deduction

This is another area that has been discussed as something that will negatively impact homeowners who have a mortgage on their homes. Again, I’ll start with an explanation.

What is the mortgage interest deduction?

The mortgage interest deduction allows any taxpayer who itemizes their deductions to deduct the interest they pay on a mortgage for their main home or a second home, up to a maximum of $1 million in combined debt. These loans include a mortgage to buy a home as well as a second mortgage, line of credit, or home equity loan, as long as the loan is secured by your home and you are the primary borrower who is legally obligated to pay the debt.

What was proposed

The House proposed capping the mortgage interest limit to $500,000 in debt and eliminating the deduction for second homes. The Senate wanted to keep the limit at $1 million.

What the new law says

For the new law, the House and Senate met in the middle. The new limit is for $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered and not subject to the new cap. Homeowners may refinance mortgage debts that existed on 12/14/17 up to $1 million and still deduct the interest, as long as the new loan does not exceed the amount of the mortgage being refinanced (i.e., not a cash out re-fi).

The new law repeals the deduction for interest paid on home equity debt through 2025. However, interest on home equity loans or second mortgages is deductible if the proceeds are used to substantially improve the home.

Interest remains deductible on second homes, subject to the $750,000 limit (or $1 million for existing debt as of 12/14/17).

What this means for you in Central Ohio

For all of the discussion about how this is a big takeaway, there are two things you should consider. First, the average sale price for a home in Central Ohio in November 2017 was $214,908. Of the 33,126 homes sold in 2017 in Central Ohio, only 324 of them sold for $750,000 or more. Obviously, the price of the vast majority of homes in and around Columbus is well below the limit for interest deductions.

Second, it is estimated that only about 30% of taxpayers nationwide currently itemize their deductions. The vast majority take the standard deduction. In addition, the standard deduction was doubled in the new law to $12,000 for individuals and $24,000 for joint returns. Congress estimates that only 5-8% of the population will be eligible to itemize moving forward, so for over 90% of taxpayers the new law won’t matter.

While expensive, high income markets like New York and California will feel the impact of this change in the law, most of us in Central Ohio have nothing to worry about.


State and local taxes (SALT), which include property taxes, are another area that was changed in the new tax law.

What is the SALT deduction?

The SALT deduction allows any taxpayer who itemizes their deductions to deduct the taxes paid at the state and local level in the previous year, including property taxes, on their current federal tax return. Through this deduction, taxpayers avoid being taxed twice on the same income.

What was proposed

Both the House and the Senate proposed completely eliminating the deduction for state and local taxes while limiting property tax deductions to $10,000.

What the new law says

The new tax law is an improvement over the House and Senate proposals, but it is less beneficial than the current law. Taxpayers who itemize can claim up to $10,000 of state and local taxes, including property taxes. This limit applies to both single and married filers.

What this means for you in Central Ohio

If you own a home valued above the $215,000 Central Ohio average and/or live in one of our more highly-taxed suburbs, the amount of state and local tax that you can itemize may be limited. However, keep in mind what I said earlier—it is projected that fewer than 10% of taxpayers will benefit from itemizing over taking the new, higher standard deduction. Consequently, for most of us in and around Columbus this will not make a difference.


Obviously I don’t have enough room here to cover the entire law and how it might affect you, nor am I qualified to do so. As I recommended at the start, you should talk with your tax professional to see how your overall situation will be affected. However, I hope this overview has helped to make it clear that for the vast majority of us living in and around Columbus, the new tax law should have little to no effect on the decision to buy or sell a home in 2018. So go find something else to spend your time and energy on. Maybe a home remodeling project? (Stay tuned for details about our own project that we finally finished over the holiday break.)

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2 thoughts on “What the New Tax Law Means for Real Estate in Central Ohio”

  • Troy Strawhecker

    January 6, 2018 at 1:49 pm

    Good, succinct summary.

    • Corey Liepelt

      January 6, 2018 at 5:31 pm

      Thank you, Troy.

Comments are closed.

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