How Tax Reform Will Affect Real Estate

Dated: February 1 2018

Views: 371

Are you struggling to understand the new tax law and how it will affect if you buy or sell a home?  The new law – passed late last year – represents the first significant tax overhaul in more than 30 years.

The first thing to do is take a breath and remember that the law’s provisions will not affect tax filings for 2017. Here are some of the basics:

tax_deductions_for_agents.jpg

Income Tax Brackets: The new law retains seven brackets and provides for generally lower tax rates. All individual provisions are effective for the 2018 tax filing year.

Standard Deduction: The standard deduction is roughly doubled to $12,000 for single filers and $24,000 for joint filers.

Primary Residence: Homeowners who remain in a home purchased on or before Dec. 14, 2017, are grandfathered and maintain the $1 million mortgage interest deduction threshold. For primary residences purchased after Dec. 14, 2017, the limit for mortgage interest deduction drops to $750,000. This change will likely impact home sales in markets with above-average home prices. For homeowners in less-expensive housing markets, opting not to itemize and instead taking the new standard deduction may make better financial sense.

State and Local Taxes (SALT): Homeowners may itemize up to $10,000 for the total of state and local property taxes and income or sales taxes. Previously, homeowners could deduct all taxes paid. Homeowners in high property tax states may find a portion of their tax bill to be nondeductible.

Capital Gains: The deductible amount remains at $250,000 if filing single and up to $500,000 if married filing jointly – if the homeowner has lived there for two of the previous five years.

Refinancing: Homeowners may refinance mortgage debts up to $1 million and deduct the interest if they owned the home on or before Dec. 14, 2017, and the new loan does not exceed the amount of the mortgage being refinanced.

Secondary Residence: Interest paid on second home mortgages is deductible but is subject to the $1 million limit for homes purchased on or before Dec. 14, 2017, and $750,000 for homes purchased after.

Home Equity Debt: Home equity loan or line of credit interest is no longer deductible. Previously, interest paid was deductible for debt up to $50,000 for single filers and $100,000 for married filing jointly. Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence.

Moving Expenses: Moving expenses are no longer deductible except for members of the military.

There’s still a lot to be learned about the new tax law. I highly recommend that you consult a tax professional for questions specific to your unique situation before you buy or sell a home.

Blog author image

Rich Conrad

One of my primary goals in real estate is to assist buyers in finding the home of their dreams and help sellers sell their home in the quickest time possible, and at the highest price (while minimizi....

Want to Advertise on this Site?

Latest Blog Posts

Assisted Living Options In Goodyear

Looking for senior care can be stressful and confusing, and you may be unsure where to start. Whether you’re looking for a senior living community or help with in-home care, Caring.com can help

Read More

VA Loans With 500 FICO And Money At Closing

I have teamed up with a lender who can now help out my veterans with lending if they have a 500 FICO or higher!  For so lenders would only do a VA loan with a 600 or higher so I went on the

Read More

Lease With The Option To Purchase If You Have A 550 Credit Score

So I've been trying to find products that think outside the box.  Something that can help the clients that built my business several years ago.  My renters were a big part of my start!;

Read More

HOW TO MOVE WITH KIDS

As if moving isn't already hard enough, adding your children into the mix can present a whole new challenge. Kids are resilient, but major changes like big moves can be difficult to work through if

Read More