PROVIDENCE – The 2017 federal tax reform, which put a new limit on a deduction for state and local property tax and mortgage interest, may have contributed to slowing home price growth in Rhode Island and other high-tax states.
That’s the assessment of Fitch Ratings, which evaluated home price growth in the 10 states with the highest property taxes, including the Ocean State.
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According to its analysis, since 2018, when the act took effect, states with higher property taxes have seen acute home price appreciation slowdown, and even some price declines in several cities. Fitch said the significant factors could also include rising mortgage rates in 2018 and a large supply of high-priced homes.
In the 10 states with the highest property taxes and mortgage interest, the average home price growth declined to 2.7% in September 2019, from 6.4% in January 2018, Fitch reported.
The high-tax states are California, New Jersey, Hawaii, Connecticut, Massachusetts, New York, Maryland, Washington, New Hampshire and Rhode Island.
The values tracked by Fitch reflect the combined values for a median home in the top tax states. Rhode Island’s appreciation, according to the Rhode Island Association of Realtors, was 7.3% for a single-family home in the third quarter, compared to the same period in 2018.
The new cap sets a maximum of $10,000 for property, income, vehicle and sales tax deductions. High-income taxpayers are the most affected. The tax act also lowered the amount of housing debt eligible for the mortgage interest deduction to $750,000.
In the tax year 2017, more than 60% of taxpayers who earned more than $100,000 claimed a SALT deduction – short for State and Local Tax – compared to 10% of those who earned $50,000.
Mary MacDonald is a staff writer for PBN. Contact her at macdonald@pbn.com.
