Just days before Christmas 2017, President Donald Trump signed the Tax Cuts and Jobs Act into law. Some of the changes brought forth will have widespread ramifications for individuals and companies, especially for real estate investors and homeowners. Some people will benefit significantly while others stand to lose quite a bit of money.

So what does all of this mean for real estate? For some homeowners, net after-tax housing costs will increase under the new law. Renting may see resurgence for those who have considered home ownership but are unsure if it is their best option. The supply of homes on the market may simply dry up. How exactly the tax overhaul will affect you and your housing options will depend on where you live, the closing price of your home and how much the bill decreases (or increases) your overall tax burden.

Here is a brief synopsis of the provisions in the new law that could directly impact the housing market in your area:

The Mortgage Interest Deduction
If you buy a home between now and 2026, you can deduct the interest on up to $750,000 in mortgage debt used to purchase or improve it as an itemized deduction. Since most people’s home values don’t exceed $750,000, this is another measure that affects mostly expensive coastal housing markets. The new cap will only apply to existing mortgages, and since the standard deduction has doubled, this may not affect you if you forgo itemizing.

State and Local Tax Deductions
Under the previous tax law, all property taxes paid to state and local governments could be claimed as an itemized deduction. It was also possible to deduct state and local income or sales taxes. The new tax law bundles all these taxes together and imposes a limit on the deduction to $10,000 total for both individuals and married couples.

For some homeowners in high-tax areas such as California, New York, New Jersey and Connecticut, the $10,000 limit does not even come close to covering their combined property and income tax bills. Some state governments are attempting to find creative loopholes for 2018 and beyond. This may include charitable deductions, which do not have limits. The new legislation in the California State Senate, for instance, would allow residents to make charitable contributions to the state in lieu of tax payments. The legality of this tactic is unclear at this time.

Capital Gains Exclusion
Home sellers can exclude up to $500,000 for joint filers or $250,000 for single filers for capital gains when selling a primary home as long as the homeowner has lived in the residence for two of the past five years. An earlier proposal would have increased that requirement to five out of the last eight years but it was struck down.

Estate tax
The law doubles the estate tax exemption to $11.2 million.

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