March 6, 2019 — You might call this article, “SALT in the Wound”. The federal tax law that went into effect last year capped state and local tax (SALT) exemptions at $10,000. It was feared at the time that this decrease would depress real estate values in some high tax states. A recent Wall Street Journal article, “Out of State Real Estate Buyers Flock to Miami“, reports it is happening – out of state real estate purchases in Miami and Las Vegas have jumped, driving price increases along the way. Many of these buyers are coming from states like New York, New Jersey, and Illinois, where home prices are flat or even worse.
New York Gov. Andrew Cuomo even blamed the 2017 tax bill for a recent budget deficit, saying that it made states like Florida much more attractive to residents of the Empire State. The Journal quoted Jonathan Miller of the real-estate company Douglas Elliman as saying: “I’ve been starting to see New Yorkers as Florida’s new foreign buyer.”
Price date from the National Association of Realtors for the 4th Quarter of 2018 bear this out. While prices in Miami rose 4.5% year to year and Las Vegas’s were up 10.6%, New York/Jersey City/White Plains declined 0.4%, and Philadelphia was flat year to year. Hartford increased 1.4%. Austin, in the zero income tax state of Texas, had a healthy 5.9% increase in the 4th quarter.
Residents of states in the Northeast, California, and Midwest can easily pay far more than the $10,000 deduction allowed for SALT taxes. Property taxes alone in the NYC region can go over $30,000 with no problem.
While this shift in value and flight from high tax states would seem to affect working people more than retirees, it still will probably have an effect on boomers looking to relocate. That is because they will probably get less for their high tax home, and pay more in the low tax Sunbelt.
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