A golfer's market? New American tax laws might influence your golf course real estate purchase

In an otherwise turbulent and controversial presidency so far, Donald Trump's biggest domestic policy accomplishment has been the passage of the Tax Cuts and Jobs Act.

Passed on December 22, the measure constituted what accounting and financial services giant PricewaterhouseCoopers called, "the most significant overhaul of the US tax code in more than 30 years."

This bill has some implications for the real estate market, which means it has some implications for golfers, especially those in the market for condos, townhomes and houses on or near golf courses in the future.

If you're considering a move - either part-time or permanent - to a golf hotbed, here are some factors to consider:

Property tax and mortgage interest deductions

Under the new tax scheme, homeowners can only deduct $10,000 worth of "SALT" (state and local) property taxes they pay. In some places, like Jersey City, New Jersey, this is causing property tax burdens to spike dramatically.

Before the passage of the bill, homeowners could deduct interest paid on mortgages of up to $1 million. The Tax Cuts And Jobs Act lowered that threshold to $750,000. Golf being a broadly affluent sport, there are probably plenty of residents of houses in the $750,000 to $1 million range who have seen their tax obligations increase because of this change to the law.

Still, it could have been worse. Early drafts of the Tax Cuts And Jobs Act proposed to disable multiple homeowners from deducting the property taxes on any residences beyond their primary ones. Backlash against this prompted an adjustment to the bill, such that now, if you have two mortgages totaling $750,000 or less, you'll still be able to deduct that property tax. But in order to take that deduction, you will have to itemize your next tax return.

Varied though their impact may be, increases on property tax burdens make the prospect of living in states with lower property taxes an attractive one. It just so happens that golf-hotbed states like Hawaii, Alabama and South Carolina are among the least property-tax-burdensome in the country. If you want to escape high property taxes in the Northeast, Midwest or California, you'll find plenty of golf communities with properties that will provide some relief.

Rent or buy?

Many people drawn south and west by the prospect of warm year-round weather and lower property taxes are not inclined to jump in fully. Instead, they'll dip a toe in the water by renting a place for the fall and winter months, living as traditional "snowbirds." By doubling the standard tax deduction, the Tax Cuts And Jobs Act makes renting - even longer-term than a few months - a more attractive proposition than it had been. Per an article from Time.com:

"One recent study by the Urban Institute found that under the new tax law, so-called “breakeven” rents — the monthly amount above which renters are better off becoming homeowners — jumped significantly for upper-middle class and wealthy taxpayers. For instance, under the old rule, for a typical three-person family earning $75,000 owning became more financially advantageous once the family’s monthly rent exceeded $893. Under the new law that number climbs 14% to $1,017. For wealthy families the difference can be even more dramatic. For one family making $300,000, the breakeven rent jumps 32% from $2,757 a month to $3,631."

For wealthy families the difference can be even more dramatic. For one family making $300,000, the breakeven rent jumps 32% from $2,757 a month to $3,631."

So, depending on your circumstances, if you were leaning "buy" before, run the numbers again and you might end up leaning "rent," at least in the near future.

Take cues from the experts

Golf Life Navigators, based in Naples, Fla., is an up-and-coming firm that aims to pair golfers looking to purchase real estate and their "best-matched" communities and clubs in the Sunbelt; the company has recently expanded beyond Florida to Arizona and the Carolinas as well.

According to PGA Professional Jason Becker, Golf Life Navigators CEO and co-founder, the new tax legislation has helped prod golfers into action.

"We have seen a sizable increase in consumers reaching out to us this first quarter" says Becker. "There are many factors including weather, a lifestyle change, etc. But, we believe that the new tax reform laws are playing a role in consumers expediting their plans to relocate south into a tax-friendly state such as Florida."

Golf Life Navigators recently developed the ProGuide3, a free, 10-minute online survey that is helping real estate- and club membership-seeking golfers make sense of the hundreds-deep fields of options in the Sunbelt.

On the rent vs. buy issue, Becker says it's not cutting into ProGuide Inquiries. "In the first quarter we actually saw a 3% increase in consumers who would like to purchase real estate alongside their golf membership," he says. "This tells us that folks are beginning to think about selling up north and relocating south. If that number had decreased we would have assumed that consumers are looking to rent as opposed to buying."

The biggest change for golfers?

Perhaps the most consequential-to-golf effect of the Tax Cuts and Jobs Act has nothing to do with real estate, but with an aspect of many golfers' on-course time, regardless of where their rounds are taking place. The legislation stripped taxpayers of the ability to deduct half of expenses incurred in the name of client entertainment on their tax returns.

This means that if you are one of the many businesspeople who have long regarded golf as a way to build and strengthen relationships with prospective and entrenched customers, this legislation may cause you to play less golf. Deducting portions of green fees paid during golf with a business angle used to help many golfers justify not just the odd Friday-afternoon round, but their entire private club membership. It's too early to tell just how much of an effect this lost deduction will have on the golf industry, but it nevertheless worth considering in the wake of the Tax Cuts And Jobs Act's passage.

Do you foresee the recent American tax overhaul affecting your golf habits or future real estate considerations? Leave a comment to share your perspective with your fellow Golf Advisor readers!

(Correction: An earlier version of this article mistakenly conflated the Tax Cuts And Jobs Act's changes to property tax and mortgage interest deductions. This mistake has been rectified above.)

Tim Gavrich is a Senior Writer for GolfPass. Follow him on Twitter @TimGavrich and on Instagram @TimGavrich.
45 Comments
Commented on

I have heard some discussion of taking a client to lunch at a golf course and a tee time is included with the lunch. Business related meals remain 50% deductible. Just saying.

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Commented on

I find your article fascinating. I live in California belong to a private club and live on the course (home worth $750,00). I think your missing the point. Why do people live and belong to private clubs ? (So we don't have to play with a schmo.)

Commented on

Lmao I agree with you.. but not all of us are as you say SCHMO... I’ve been a RN for 32 yrs and yet a modest income will not or cannot be part of a private club because of the attitude towards golfers that can play.. why be a private club member when there many more challenges to be experienced when out there.. I calculated it last night and my family spend approximately $30000 on golf and golf trips a year.

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In a very successful and promising start to his Presidency so far is the way this article should have started. You have no clue about owing and managing property let alone, knowing anything about the new tax laws. I own two properties--one on the 13 green of a golf course, and I will do OK under the new tax laws.
What you didn't say is that this law was aimed at high earners since that id What our President was trying to do. In my view many folks earning 7 figures are probably paid much more than they are worth and can afford the hit they are taking. Which was part of the objective of the law which most liberals won't admit. So I might suggest you stick to something you know about with limited life experience. By the way I am a member of two golf clubs!

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Totally agree Ed. I own a Property also on the 13 Hole on a Gulf Coast Golf Course in Florida.This is our President
doing what he said he would do to the higher income folks,when he was running for office.

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I will be looking to transfer my club membership, due to the change in the tax code.

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At year's end I'll review the tax impact of my club membership with my CPA. if the impact is burdensome I will consider dropping the club membership in favor of an alternative semi-private club in the area where I can pay a simple green fee and play. If I continue with the private membership it will most likely be because my golf buddies at the club are retired and may not write off their club expenses anyway.

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With the President being a golfer and a real estate developer, you would have thought any legislation passed would have been friendly to both. I'm a Realtor and a golfer and so far I haven't heard anything negative from my buddies who are country club members. In the real estate industry we're not seeing anything slowing down in San Diego. Overall, not sure the new tax code has had much of an effect on consumer motivation to buy or play but then again, no one has filed a 2018 return yet. We'll see.

Commented on

Your right. Nobody has filed a return yet under the new tax laws. Just wait and I think your going to hear some groans....

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In an otherwise turbulent and controversial presidency so far, " , opening your article in this manner, was both unnecessary and insulting to your readers. No need to editorialize, your feelings for the President are now well noted. As a 30 year California resident, i meet people every day that are, like us, planning their Calexit. High taxes, traffic, ultra left wing politics, will result in a Arizona boom.

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Commented on

Tim - The complete inaccuracy of your opening paragraph as it relates to the deductibility of real estate taxes makes me question the validity of any of your other observations in the article. Your comments are like saying if you have a handicap of over 15, you only count one stroke for every two putts.

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Commented on

Owen--
The poor wording of the section you refer to in the original article has been changed to be more accurate.
--Tim

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I understand this article is not directed at the middle-class or poorer. But, I thought I'd rant anyway. Let's see, the golf industry is struggling to stay afloat...on its own terms (i.e., golf is for rich, WASP males only. Tiger Woods be damned!). Meanwhile, the Golf Galaxy store in Rockville, Maryland, closed a couple of weeks ago. Golf club membership fees equal the price of a car, the downpayment on a house, or a semester of college. A single golf club can cost over $1,500 (thank God for Top Flite!). Were it not for municipal golf courses, I would never have discovered golf! Good luck growing the game!

Commented on

You can easily buy a an entire set of clubs for under $1,500.. Deals on daily fee courses abound and semi private courses are starving for members. Memberships in a Private course have never been reachable for the rich and/or corporate individuals so this law won’t affect golf . It’s popularity has already decreased due to cost and competition from emerging sports and other Millennial gaming or social experiences.

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Thanks, Average Hacker! I bought my set on Ebay for under $50! I play municipal courses because they're affordable for me. As much as I love golf, its impact on the environment does not make me sad about its decline.

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You are way off on your comment about golf courses making a negative impact on the environment, nothing could be further from the truth !!

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Jim, I was referring to how deforestation destroys the wooded habitat of deer and other wildlife that need such environments to live and thrive. True, it is not as bad as building construction, which completely decimates wildlife habits. But, it does make life more difficult for them. While the golf industry is working to make golf course management more environmentally friendly, the needs of wooded wildlife must also be considered.

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Golf courses provide one of the only (large) refuges in an urban setting for wildlife, along with parks and cemetaries. And the edge environment that golf holes with wooded areas provides more variety for more species than just a woodlot. Golf courses clean the air, water, and environment they occupy.

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Mike, I concur.

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Totally agree

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Sad that the tax information is so inaccurate. Having someone with just a mediocre knowledge of the new tax law review the article prior to posting it would have prevented this.

Staff
Commented on

Owen--
The poor wording of the section you refer to in the original article has been changed to be more accurate.
--Tim

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A golfer's market? New American tax laws might influence your golf course real estate purchase