Posted On: January 17th, 2018 6:57PM
The signing of the Tax Cuts and Jobs Act towards the end of December 2017 is not going to affect homeowners and the way they will taxed for the 2017 financial year. The changes will come into effect from the 1st of January 2018 and this will impact the decisions that will be made by existing and especially future homeowners.
The changes in the law* which will impact homeowners are:
Limited Mortgage Interest Deductions
The maximum amount of mortgage debt interest that can be deducted is $750,000 from the previous amount of $1 million. This will affect loans that are taken from mid December 2017 onwards. If you are paying off a mortgage for a second home the interest will also be deductible up to the same amount of $750,000. Home equity loan interest will only be deductible if the money has been used for home improvements.
Up until the passing of the new law all property taxes whether state or localized were claimed as deductions. The new law allows for a total of up to a $10,000 deduction only. The amount is the same for both individuals and married couples.
These are doubled under the new law at $12,000 for individuals and $24,000 for joint filers. Many taxpayers will most likely prefer standard deduction to itemizing their filing so as not to reduce the tax related benefits of owning a home.
Capital Gains Tax
The exclusion of capital gains tax for the sale of a primary home is to be maintained. This means that a seller may exclude $250,000 of gain from taxation as an individual and $500,000 if married. The required years of ownership are for two of five instead of the five of eight that was initially sought.
As part of my REALTOR® services, I do my best to stay abreast of important legislative, market, and tax issues influencing housing.
*I do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
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