The Trump administration’s tax overhaul has introduced significant changes that affect many Americans—especially retirees who own multiple homes. From federal estate taxes to property tax deductions, these changes alter how retirees plan their finances. Arizona residents face additional state-level updates as the state adjusts its tax code to align with federal reforms.
This article breaks down the key tax code changes under the new administration—including estate tax thresholds, property and capital gains implications, and other provisions—and compares them to prior law. We aim to provide clear explanations of what’s changed and how it might impact retirees with more than one property. (As always, consult a qualified tax professional for advice specific to your situation.)
Estate Tax Changes
One major change is the federal estate tax exemption increase. Under previous law, estates above roughly $5.49 million per person (about $11 million for a married couple) were subject to federal estate tax in 2017. The Tax Cuts and Jobs Act (TCJA) doubled this exemption. For estates of individuals dying from 2018 onward, the first $11.2 million of assets are exempt from federal estate tax (about $22.4 million for couples), with amounts above that taxed at 40%.
In effect, far fewer families now face the estate tax—an estimated 1,700 estates in 2018 versus about 5,500 under prior law. This change is slated to remain through 2025, after which the exemption would revert to pre-2018 levels unless extended. Retirees with substantial assets, including multiple properties, should note that this higher exemption significantly reduces federal estate tax exposure for all but the largest estates.
Arizona does not impose a state estate tax or inheritance tax. Arizona repealed its estate tax effective 2005, so only the federal estate tax applies to residents’ estates. The recent federal changes therefore provide relief to wealthy Arizonans by raising the bar for taxation of estates.
Additionally, the step-up in cost basis for inherited assets remains in place under the new law—meaning heirs generally receive property with its value “stepped up” to fair market value at death, avoiding capital gains on any appreciation that occurred during the decedent’s life. There had been discussion of altering this provision, but no changes were made, preserving a valuable tax benefit for heirs, especially relevant when passing down highly appreciated real estate.
Property Tax Deduction Updates (SALT Cap)
Retirees owning multiple homes often pay significant property taxes—and previously, all state and local taxes (including property taxes) were deductible from federal income if one itemized. The new tax law has placed a firm limit on this benefit. State and Local Tax (SALT) deductions are now capped at $10,000 per year for both single and married filers.
This $10,000 cap applies to the combined total of property taxes and state income (or sales) taxes you deduct. In the past, a retiree with two homes could deduct all property taxes paid. Now, only $10,000 of that total is deductible.
This change disproportionately affects those in higher-tax states or with expensive properties. If you own homes in two states or two high-tax counties, you may easily exceed the $10k cap.
At the state level, Arizona’s property tax laws have not changed under the new federal administration—property tax rates and assessments are set by local jurisdictions and remain the same. Arizona does offer property tax relief programs for seniors (such as limited exemptions or deferrals for qualifying low-income seniors and a property valuation freeze for those 65+ meeting income criteria). The key update for Arizona retirees is how the federal SALT deduction cap limits the benefit of paying those property taxes.
Mortgage Interest and Home Equity Loan Deductions
Lower Mortgage Debt Cap: Interest on mortgage debt is now deductible on a maximum of $750,000 of principal for loans taken out after December 15, 2017. Previously, interest on up to $1 million in home acquisition debt was deductible. Loans that existed before the cutoff date are grandfathered in.
Interest on Second Homes: Interest on mortgages for second homes is still deductible but is subject to the same combined $750,000 cap.
Home Equity Loan Interest: The law eliminated the deduction for interest on home equity loans (HELOCs) and home equity lines, unless the funds were used to “buy, build, or substantially improve” a home. In other words, interest on home equity debt used for personal expenses (like travel, medical bills, or other spending) is no longer deductible.
These changes tend to affect those with larger or multiple mortgages. Retirees who have paid off their homes won’t be impacted by the mortgage interest cap, but those carrying significant debt on high-value properties or multiple residences will see a limitation.
Capital Gains Implications for Homeowners
Primary Residence Exclusion: Sellers can still exclude up to $250,000 of gain from the sale of a primary residence (or $500,000 for a married couple filing jointly) provided they owned and lived in the home for at least 2 of the 5 years before sale.
Second Homes and Investment Properties: If you sell a second home that was not your primary residence, the primary-home exclusion does not apply. Any gain on the sale of a vacation home or rental property is subject to capital gains tax.
Like-Kind Exchanges: The 1031 like-kind exchange for real estate remains in place, allowing tax-deferred exchanges when selling investment real estate and buying another property.
Arizona State Tax Updates
Lower State Income Tax Rates: Arizona reduced its individual income tax brackets from five down to four, slightly lowering rates.
Higher Standard Deduction: Arizona’s standard deduction has increased to match the federal standard deduction introduced by the TCJA.
No State Estate or Gift Tax: Arizona continues to impose no estate or inheritance tax at the state level.
Conclusion and Advice
The sweeping tax code changes under the Trump administration have created a new landscape for retirees, especially those who own multiple homes. While estate taxes have become less of a concern for most, the new SALT cap significantly limits tax deductions on property and state taxes. Mortgage interest deductions have also been reduced, particularly for high-value properties.
Retirees should review their tax situation annually to determine whether they should itemize deductions or take the standard deduction, how the SALT cap affects the after-tax cost of owning multiple homes, and if their estate planning needs adjustment.
Most importantly, seek guidance from a professional tax advisor or financial planner who can tailor advice to your specific circumstances.
Sources:
U.S. Internal Revenue Service (IRS)
Arizona Department of Revenue
Tax Cuts and Jobs Act (TCJA) Legislative Summary
Congressional Budget Office (CBO) Reports on Tax Law Changes
National Association of Realtors (NAR) Policy Briefs
Tax Foundation Reports on Federal and State Tax Policies
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