The latest tax regulations have curbed property tax deductions in a big way, and that could send home prices on the decline. Now, homeowners can deduct just $10,000 for property and income taxes. While that may not be an issue in most of the country, in the NYC suburbs this shift is leaving homeowners scrambling—here, it’s not unusual for a homeowner to pay $20,000, $30,000, even $50,000 in property taxes in a single year, especially when dealing with Westchester homes.
What New Tax Reforms Mean for Westchester
The pains are especially being felt for Westchester homes. Westchester is “Home of America’s Highest Property Taxes.” Here, three in four properties exceed the $10,000 cap, driving income taxes up for the majority of Westchester homeowners. The average property tax bill on Westchester homes was nearly $17,000 in 2016. This alone could hit Westchester residents in a big way. “A hypothetical $3 million home in Larchmont carrying $70,000 in yearly property taxes could mean an additional $22,000 hit on the owners’ federal return,” writes Bloomberg, “assuming they are subject to the new top income-tax rate of 37%.”
That’s just the beginning, though. Mortgage interest deduction is now being capped at new loans of $750,000 or more. Nearly one in five Westchester homes have mortgages that exceed that amount in 2017, versus just 3.9% nationally.
The Silver Lining for City Families
The bright spot? Many experts are anticipating price reductions on Westchester homes. In Q2 2018, sales were down more than 5%, with purchase contracts on single-family homes down 4.2% in the same period.
For those Westchester homes with high property taxes, sellers are having to consider significant reductions to generate interest. If buyers aren’t willing to pay tens of thousands of dollars in non-deductible property taxes, sellers will need to do something to sweeten the pot. In hotspots like Scarsdale, Larchmont, and Irvington, it’s not uncommon to see seven-figure listings slashed by 10% or more, hoping to attract property tax-shy buyers. And it seems to be working—average days on market (DOM) is fairly stable at around 82 days.
The reality? The most important thing is finding the right place for you and your family to call “home.” The NYC suburbs tend to fall on the higher side when it comes to property taxes, whether you land in Westchester, Long Island, Connecticut or New Jersey—it’s, as many buyers explain, the cost of doing business in the NYC suburbs.
However, now more than ever, you may be able to use this to your advantage and get a better deal upfront that helps offset the loss of deductions. And, for many families, that’s an easy way to get into an even better home than they’d anticipated—and that’s a serious WIN.
Ready to explore Westchester or any of the other NYC suburbs? Let’s talk and see what suburbs suit your family’s unique lifestyle.