The new tax law passed and signed into law at the end of 2017 is one of the most significant overhauls to the tax code since the 1980s. As a homeowner it is important to be aware of how these changes affect the real estate market – in particular your personal residence or investment property. Here’s a look at how the new tax reform impacts current and prospective homeowners:
Mortgage Interest Deduction
The limit on deductible mortgage debt is $750000 for new loans taken out after December 14 2017 – down from the previous $1 million. While this does not affect current homeowners it will impact buyers purchasing homes in the future – specifically those purchasing high-end luxury homes.
State and Local Tax Deductions
The cap on state and local deductions for income and property tax is now $10000 for single and married filings. Previously this deduction had no cap.
The new bill retains the current capital gains law of $250000 single and $500000 married. The only aspect that has changed is how long you must reside in the residence to qualify – instead of two out of the past five years it is now five of the past eight years.
The standard deduction – the amount you can subtract from your income before calculating taxes if you are not itemizing your return – has increased to $12000 single and $24000 married. As this deduction has doubled many homeowners believe it no longer makes sense to itemize.
The new law repeals moving expense deduction and exclusion – except for members of the military.
Casualty Loss Deduction
The new law only allows you to deduct losses attributable to a presidentially-declared disaster.
Despite all of these changes homeownership remains beneficial.
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