How Tariffs Could Trickle Down to Your Kitchen Remodel

Original article by Inti Pacheco @

The U.S. has agreed to suspend a planned January increase in tariffs on $200 billion in Chinese goods to 25% from 10%, as the two sides negotiate on trade. But tariffs are already having an impact in kitchens across the U.S., and the truce isn’t expected to soften the blow.

Just about every material you’d need to remodel a kitchen is now subject to the earlier round of tariffs. Many U.S. vendors import the majority of their materials from China. Flooring, cabinets, countertops, sinks, refrigerators and lighting fixtures are on the list of imports from China that now have a 10% tax, as are many of the materials used to make them, from plywood and quartz to stone and granite.

Companies across the construction supply chain have tried to mitigate the impact, including by looking for alternative suppliers in neighboring countries like Vietnam and Cambodia or loading up on inventory in the event that the tax jumps to 25% in January. But many say they have had to raise prices to offset the effects of tariffs. American suppliers are now raising prices as well, as tariffs on foreign products have boosted demand for theirs.

Companies say prices will remain elevated even if the U.S. and China reach a trade deal in which Washington would hold off on future tariffs.

The Wall Street Journal spoke to manufacturers and distributors of the various components of a kitchen to assess the added cost of a remodel. We based our price increases on interviews with individual vendors. For the percentage of the budget that each piece of the job makes up, we used a cost calculator from KitchenCraft Cabinetry, a subsidiary of MasterBrand Cabinets Inc., based in Jasper, Ind.


Starbucks may affect housing prices?

An interesting study was done by Harvard Business School using Yelp data to find that each entry of Starbucks into a Zip code was associated with a 0.5 percent increase in housing price. In my opinion, the hypothesis of whether Starbucks has the ability to drive the neighborhood economic change is as controversial as the chicken or egg question. The same observation can also apply to other similar restaurants/stores such as Wholefood Market. What really drew my attention is that the Harvard economists use Yelp data rather than the government statistics, the first of its kind that shows more ways to analyze the economic effect.


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Frequently asked questions about 1031 Exchanges

If you are a real estate investor or plan on investing in the real estate business, you should know about 1031 Exchange. Below, I have gathered some common questions that people often ask.


Q: What is 1031 Exchange?
: 1031 Exchange, also known as tax-deferred exchange, is an IRS-authorized process where like-kind business or investment property is exchanged without immediate tax liability to the property owner.

The IRS requires a neutral third party, known as a facilitator, qualified intermediary (QI) or accommodator to be used for facilitating the 1031 Exchange. In most cases, the title company who handles escrow of your property can be used as 1031 facilitator.

Q: How long do I have to own a property before I can exchange it?
A: Unfortunately, there is no safe holding period for property to automatically qualify for an exchange. Keep in mind, the property only needs to be “held for investment” for it to be eligible for an exchange. Time of ownership is only one factor the IRS looks at when determining if the property was “held for investment”. Some tax advisors recommend a minimum holding period of one year.

Q: Can I sell my duplex and purchase raw land?
A: Yes. Holding land for its future appreciation would be considered held for investment. “Like kind” can be any real property used for business or investment purposes within the U.S.

Q: Can I buy my replacement property first?
A: Yes. This requires that you do a reverse exchange. The reverse exchange may be an option provided it is structured according to the safe harbor guidelines.

Q: Can I move into a rental property that was originally purchased as part of a 1031 Exchange?
A: Yes. However, please keep in mind that the IRS will look at your “intent” in determining if your exchange is valid. If the IRS feels your original intent when the property was initially acquired was to use it as a primary residence, you may have your exchange disqualified.

Q: Do I have to reinvest ALL of my cash (equity)?
A: No. However, any cash (equity) that is not reinvested in real estate will be taxable (and is known as cash boot). If you don’t want to pay any taxes, is to reinvest all of your cash and purchase a property equal or greater in value.

Q: How long do I have to complete my exchange?
A: 180 days. However, also keep in mind you will be required to identify your potential replacement properties on day 45 of your exchange. Your timeline starts when you close escrow on the property you
are selling.

Q: Does my Realtor need to do anything special since I am exchanging?
A: Your Realtor needs to make sure the sales contract is assignable and include the appropriate 1031 Exchange language.

Q: May I do a multiple lag exchange?
A: Yes. Several relinquished properties may be exchanged for a single replacement property. The 45-day identification rule and 180-day replacement rule will start running from the date of sale of the first relinquished property.

Q: Do I receive a tax basis in my replacement property?
A: No. The amount of depreciation that can be claimed on a replacement property is based upon the adjusted basis of the relinquished property at the time of the exchange.