Wednesday, Oct 17th

Last updateWed, 17 Oct 2018 10am

You are here: Home Content Shout it Out New Tax Code Could Hit Scarsdale Hard
first
  
last
 
 
start
stop
Deb Pekarek to Chair Scarsdale Bowl Committee

Deb Pekarek to Chair Scarsdale Bowl Committee

Deb Pekarek has been named Chair of the 2019 Scarsdale Bowl Committ...

Scarsdale Girls Varsity Swim and Dive Team's Historic Season

Scarsdale Girls Varsity Swim and Dive Team's Historic Season

The Scarsdale Girls Varsity Swim & Dive team has followed up la...

St. James the Less Hosts Graveyard Tour and Halloween Party

St. James the Less Hosts Graveyard Tour and Halloween Party

The ghosts will haunt the graveyard at the Church of St. James the ...

Scarsdale Forum Recommends Organic Landscape Practices For All Village Properties

Scarsdale Forum Recommends Organic Landscape Practices For All Village Properties

The Scarsdale Forum Sustainability and Municipal Services Committee...

first
  
last
 
 
start
stop

New Tax Code Could Hit Scarsdale Hard

homepricesScarsdale residents and Scarsdale home values could both take a big hit when the new tax bill is enacted. At present the differences between the House and Senate versions of the tax bill will be reconciled by a conference committee and then enacted into law, but both versions include provisions that will be costly to many Scarsdale residents.

Both versions would hurt New York residents and especially residents in areas with high property taxes like Scarsdale as they limit the property tax deduction to $10,000 per year and completely eliminate deductions for state and local income taxes (SALT). According to the New York Times, Westchester County taxpayers are among 12 national counties that take the highest SALT deductions, with 47% of residents taking an average deduction of $34,300. However in Scarsdale, where the homeowner of an average house pays about $35,000 in real estate taxes alone, the impact of the loss of this deduction would be far greater.

The two bills differ on the deduction for mortgage interest. The limit for mortgage interest deductions are $500K for the House bill and $1mm for the Senate bill.

Moody's Analytics predicts that the elimination of the SALT deduction will cause housing prices to fall about 10%, as homes will have greater carrying costs per month and be less affordable to prospective buyers. If the House version of the bill is passed and mortgage interest deductions are capped at $500,000 in debt, this could further impact homebuyers and the Scarsdale real estate market.

David Gussman a Scarsdale resident and mortgage professional provided this back-of-the-envelope example of how a typical Scarsdale home buyer stands to fair under the new code:

Assuming a $10K property tax deduction is passed and the mortgage limit is reduced to a maximum size of $500K for deductibility of interest, Gussman determined that a new home buyer making about $500K per year buying a $1.7mm home in Scarsdale and taking a $1mm dollar mortgage could see the after-tax cost of the mortgage payment and property taxes increase by about 20% in comparison to the payment under the current tax code. The after tax cost of the 30-year fixed rate mortgage and property tax payments under the current law is $5,140 per month and after the changes it would be $6,140 per month, for a difference of $1,000 a month.

The impact will be different for different homebuyers depending upon their level of income, particular tax situation and which elements are included in the final version of the tax bill.

David Gussman is a mortgage professional who has managed ~$80B of non-agency mortgage bonds at Fannie Mae and ran product and technology for a company that collected information on every mortgage in America and provided data and analytics to holders of mortgage risk. He currently makes investments in start-up specialty finance companies and advises companies in the real estate/mortgage space. He lives in Scarsdale with his family.

BLOG COMMENTS POWERED BY DISQUS

Comments   

#24 A. Greenstein 2017-12-12 11:16
Why do people keep voting to raise taxes?? I see in today's news :"Westchester approves first tax increase in 8 years; Astorino vows veto"
Quote
#23 Almosouttahere 2017-12-11 22:50
Why win’t Scarsdale let is pre-pay next years taxes?
Quote
#22 Deb Silkes 2017-12-11 16:01
This would be true if bog houses are correctly assessed. Right now hundreds of smaller home ownets subsidize big homes.

[uote name="anonymous "]All this bashing of larger new houses makes no sense to me. The total tax collected by Scarsdale isn't going to go down, if the new houses aren't built and taxed at a much higher number, where is the Village going to go to get their money? They are going to increase the rate on everyone. Let the newcomers that want a big house pay huge taxes, it only helps everyone else.
Quote
#21 anonymous 2017-12-11 12:14
All this bashing of larger new houses makes no sense to me. The total tax collected by Scarsdale isn't going to go down, if the new houses aren't built and taxed at a much higher number, where is the Village going to go to get their money? They are going to increase the rate on everyone. Let the newcomers that want a big house pay huge taxes, it only helps everyone else.
Quote
#20 A. Greenstein 2017-12-11 09:08
This will not affect the high end real estate due to the AMT. If AMT is changed it may then but on its own no.

The true issue I see is double taxation!

Quoting Prices will go down:
The tax bill will negatively impact home prices. The hi-end of Scarsdale real estate, which is already struggling, will be most affected. The cost of owning a home will go up (property tax and mortgage interest) and incomes will go down (state tax deduction).

The only silver lining is that maybe this will lead to an end to the construction of disproportionately large homes on small lots.

If there is a new reval done in the next year or two, it will likely penalize smaller homes even more than Ryan did as home prices continue o compress.
Quote
#19 C. Doullen 2017-12-09 16:11
Why would a new reval penalize smaller homes? Where is your analysis to support this? Quoting Prices will go down:
The tax bill will negatively impact home prices. The hi-end of Scarsdale real estate, which is already struggling, will be most affected. The cost of owning a home will go up (property tax and mortgage interest) and incomes will go down (state tax deduction).

The only silver lining is that maybe this will lead to an end to the construction of disproportionately large homes on small lots.

If there is a new reval done in the next year or two, it will likely penalize smaller homes even more than Ryan did as home prices continue o compress.
Quote
#18 Prices will go down 2017-12-09 07:54
The tax bill will negatively impact home prices. The hi-end of Scarsdale real estate, which is already struggling, will be most affected. The cost of owning a home will go up (property tax and mortgage interest) and incomes will go down (state tax deduction).

The only silver lining is that maybe this will lead to an end to the construction of disproportionat ely large homes on small lots.

If there is a new reval done in the next year or two, it will likely penalize smaller homes even more than Ryan did as home prices continue o compress.
Quote
#17 Unintended Consequences ? 2017-12-08 19:58
If SALT and mortgage interest exemptions don't artificially drive up real estate prices, then the Moodys Analytics research is incorrect and real estate prices will remain where they are if these exemptions are eliminated or greatly reduced.

But I doubt there will be zero impact, as a 10-20% swing to the negative in available mortgage payment cash will most certainly be considered in decision making by mortgage lenders and home buyers.

Quoting Jackson:
FYI, the SALT and Mortgage Interest Tax
deductions have been part of the tax law for over 100 years. Filers have been able to deduct state and local taxes since federal income tax was conceived in 1913. So don't think that these two deductions have "driven up home prices"....they've been around forever!

quote name="Unintended Consequences ?"]Mortgage interest and SALT exemptions have had some very negative effects. They artificially drive up home prices because people can "afford more house". Another consequence is that we see increasingly larger houses. Each of these things makes it harder, not easier, for people to stay in their homes in retirement or survive inevitable cycles in economic downturns.

As for the tax code in general, all the well intentioned levers and switches like the aforementioned exemptions have taken us further away from fairness and transparency in the tax system.
I would also argue that there is not one extremely wealthy person from Scarsdale in the last 25 years that has paid a penny in Estate tax unless they ignored the situation.
Quote
#16 Jackson 2017-12-08 18:10
FYI, the SALT and Mortgage Interest Tax deductions have been part of the tax law for over 100 years. Filers have been able to deduct state and local taxes since federal income tax was conceived in 1913. So don't think that these two deductions have "driven up home prices"....they 've been around forever!

quote name="Unintende d Consequences ?"]Mortgage interest and SALT exemptions have had some very negative effects. They artificially drive up home prices because people can "afford more house". Another consequence is that we see increasingly larger houses. Each of these things makes it harder, not easier, for people to stay in their homes in retirement or survive inevitable cycles in economic downturns.

As for the tax code in general, all the well intentioned levers and switches like the aforementioned exemptions have taken us further away from fairness and transparency in the tax system.
I would also argue that there is not one extremely wealthy person from Scarsdale in the last 25 years that has paid a penny in Estate tax unless they ignored the situation.
Quote
#15 Unintended Consequences ? 2017-12-08 10:50
Mortgage interest and SALT exemptions have had some very negative effects. They artificially drive up home prices because people can "afford more house". Another consequence is that we see increasingly larger houses. Each of these things makes it harder, not easier, for people to stay in their homes in retirement or survive inevitable cycles in economic downturns.

As for the tax code in general, all the well intentioned levers and switches like the aforementioned exemptions have taken us further away from fairness and transparency in the tax system.
I would also argue that there is not one extremely wealthy person from Scarsdale in the last 25 years that has paid a penny in Estate tax unless they ignored the situation.
Quote

Add comment

Security code
Refresh

Good Work

SETTING

Deb Pekarek to Chair Scarsdale Bowl Committee

Deb Pekarek to Chair Scarsdale Bowl Committee

Deb Pekarek has been named Chair of the 2019 Scarsdale Bowl Committee. Randy Guggenheimer, President of the Scarsdale Foundation, announc...

Read More

Around Town

SETTING

Neighborhood News

SETTING

On Our Minds

SETTING

Water, Water Everywhere… What to do About Local Flooding?

Water, Water Everywhere… What to do About Local Flooding?

Many Scarsdale residents still are cleaning up after severe flooding from two weeks ago – discarding ruined belongings, calling in mold-p...

Read More

On Our Radar

SETTING

Parenting

SETTING

St. James the Less Hosts Graveyard Tour and Halloween Party

St. James the Less Hosts Graveyard Tour and Halloween Party

The ghosts will haunt the graveyard at the Church of St. James the Less on Sunday evening, October 28th, beginning at 6:00pm. However, Mo...

Read More

Village Voices

SETTING

Village Presents Report on Road Conditions and Repaving Program

Village Presents Report on Road Conditions and Repaving Program

You’re not imagining it. The reason it feels like so many roads are being repaved in Scarsdale is because this year, the village, county ...

Read More

School News

SETTING

Schools

SETTING

Streaking Girls Varsity A Soccer Team Heads to Section 1 Playoffs

Streaking Girls Varsity A Soccer Team Heads to Section 1 Playoffs

The Raiders completed their regular season on an eight game unbeaten streak as they head into the playoffs. The Scarsdale High School Girl...

Read More

The Goods

SETTING

50 Years Later: The SHS Class of 1968 Returns for a Memorable Reunion

50 Years Later: The SHS Class of 1968 Returns for a Memorable Reunion

They came from as far as Switzerland and San Diego and as near as Edgewood and Edgemont to remember their high school years, which for so...

Read More

Real Estate

SETTING

People

SETTING

Photo Opps from Fountain Six, LWVS, a Congressional Candidate and a Bake Sale

Photo Opps from Fountain Six, LWVS, a Congressional Candidate and a Bake Sale

Fountain Six kids at Wilkens Orchard The students of Fountain Six at Scarsdale Middle School took a trip to Wilkens Orchard in Yorktown on...

Read More

first
  
last
 
 
start
stop

Programs for Scarsdale Kids