Congress's new approved tax law brings with it change for homeowners in 2018. These changes can be critical in deciding when to buy or sell real estate and so here is a list of critical changes that you need to know about.
1. Mortgage interest deduction has been lowered.
Current homeowners are not affected, but starting from next year, those buying a new home will only be able to deduct the interest from the first $750,000 (or $375,000 if you use married filing separate status) of their mortgage debt which is down from the previous $1 million amount (or $500,000 if you use married filing separate status).
2. No more home equity line interest deduction.
The new tax law also wipes out the old $100,000 home equity line deduction for expenses other than build, buy, or home improvements. For example, if you pulled money out from your home equity line to pay tuition, you may no lower deduct the interest.
3. Property tax deduction limit.
Under old tax law, you were able to deduct the full amount of your homes property tax but the new tax law limits this deduction to $10,000.
4. Taxes affecting selling your home for a profit remain unchanged.
Many home owners were anxious to see what happened with the capital gain exclusion under the new tax law. Homeowners who sell their house for a profit are still be able to exclude up to $500,000 gain (or $250,000 for single filers). This deduction is for your primary residence only, and a primary residence is considered a home that you have used as your primary residence for 2 of the last 5 years.
These are just some of the key changes that will affect homeownership in 2018.
The new tax law is upon us so be prepared and informed. Talk to your CPA and learn about how these changes affect you and your local state.