The Tax Cuts and Jobs Act, signed into law in late December, will affect millions of Americans in different ways. When it comes to real estate, legal experts suggest that the massive tax overhaul could have some unintended consequences, including discouraging homeownership and slowing the pace of home appreciation.

Here’s how the new law affects homeowners:

• Lower limits on mortgage interest deductions: Under the new law, homeowners can deduct interest on mortgages up to $750,000, down from $1 million. The reduction makes it more expensive to borrow money for high-priced homes.
• Limits on SALT deductions: Previously all state and local taxes (SALT) could be claimed as an itemized deduction. Now all SALT tax deductions — including property, income and sales taxes — have a collective $10,000 cap.
• Standard deduction doubled: The new law doubles the standard deduction to $12,000 for an individual filer and $24,000 for a married couple. That means fewer couples will have an incentive to itemize because their mortgage interest and $10,000-capped SALT deduction won’t exceed $24,000.
• Home equity loan advantages gone: In the past, homeowners were able to deduct up to $100,000 in interest on home equity loans. That deduction is gone altogether, even if you take out the loan for real estate improvements. The change does not have a grandfather provision, meaning everyone with a home equity loan will be affected.
• Most relocation deductions eliminated: Under the old law, you could deduct some of your moving expenses when relocating for a new job. Now, only active duty service members may deduct those costs.

Real estate winners and losers

Coastal states — lose: According to the National Association of Realtors, approximately 95 percent of homeowners will be unaffected by the $10,000 cap on state and local deductions. However, homeowners in high tax states, such as California, Connecticut, New Jersey and New York, will take a hit. In New York, 19 percent of homeowners pay more than $10,000 in property tax alone. In New Jersey, it’s 30 percent. These are also the states where homes are most likely to exceed the new $750,000 limit for mortgage interest, making homeownership more unaffordable than before.

Middle America — mostly neutral: Homeowners in the middle of the county will be least affected because home values there remain relatively affordable. But certain high-value communities could feel the hit.

Home sellers — lose: With shrinking tax breaks, sellers may have to adjust their asking prices. Moody’s Analytics predicts that home prices nationwide will be about 4 percent lower between now and summer 2019 than where they could have been without the tax changes. Homeowners in high-value markets and high-tax states will feel the biggest hit. Moody’s predicts that homes in certain New York communities, for example, will be 10-11 percent below otherwise expected values.

High-value home buyers — win: If you’re planning to buy a home where real estate is pricey, this may be the time to find a bargain.

First time home buyers — lose: Analysts suggest that lower deduction limits could exacerbate scarcity in the affordable housing market. That’s because fewer homeowners will trade up into larger homes that would push them over the $10,000 SALT cap or the $750,000 mortgage threshold.

Landlords and developers — win: Shrinking tax perks on homeownership reduces the economic incentive to buy a home. That means landlords and real estate developers will come out ahead if more would-be-homebuyers choose to rent instead.

Fewer tax rewards for first-time homeowners

While political leaders have long touted the benefits of homeownership, the new tax law effectively reduces the incentive to own.

Historically, tax breaks were designed to encourage people to buy that first home and then trade up as their income allowed. But the new law increases many homeowners’ net housing costs, shifting the rent vs. own equation.

The shift is the result of two key changes: scaled back deductions on property taxes combined with a doubling of the standard deduction.

Standard deduction: The new law doubles the standard deduction to $12,000 for an individual filer and $24,000 for a married couple. (The IRS standard deduction is the portion of income that is not subject to tax, thereby lowering your overall tax burden. Taxpayers may choose to take the standard deduction or itemize deductions instead.)

Doubling the standard deduction means fewer people will have the incentive to itemize. The nonpartisan Tax Policy Center estimates that the number of itemizers will fall from about 49 million to 10 million.

For example, if you’re married and filing jointly and paid $20,000 in mortgage interest and property taxes, you would have itemized those deductions in the past, getting a nice little perk for homeownership. But beginning in 2018, you will take the standard deduction instead.

While the shift doesn’t necessarily change a person’s overall tax burden, it does remove the tax write-off that comes with homeownership. That could change the rent vs. own decision for first-time buyers.

According to Zillow, about 44 percent of homeowners were better off itemizing prior to the tax changes. That number has now dropped to just 14.4 percent. That means a big incentive to buy is now gone for about a third of potential home buyers.

SALT deductions: The new tax law also places a $10,000 cap on the amount of state and local taxes (SALT) filers can deduct. For people with high-value homes in high-tax communities, that means they won’t be able to write off as much of their property taxes, which makes homeownership less affordable.