Tax Cuts & Job Acts (Changes for Homeowners)
The recent Tax Cuts and Jobs Act offers the most substantial update to the U.S. tax code in over 30 years. Most of the updates will go into effect this month, but many Americans won’t see changes in their paycheck until February 2018. There will be little change when filing 2017 taxes, rather taxpayers will see most of the changes when they file their 2018 taxes. Unless Congress extends these provisions, nearly all tax changes for households will expire after 2025.
1. Mortgage Credit Certificates (MCCs) Preserved The final bill retains current law for MCCs. This allows qualifying homebuyers to claim a tax credit for a portion of the mortgage interest paid during a tax year, making homeownership more affordable.
2. Mortgage Interest Deduction The bill reduces the limit on deductible mortgage debt up to $750,000 for new loans taken out after December 14, 2017.
3. Exclusion of Gain on Sale of a Principal Residence The bill maintains the current law that a homeowner must live in their home 2 of the past 5 years to qualify for the capital gains exclusion. 4. Home Equity Deduction Previously, homeowners who took out a home equity line of credit for reasons other than to buy, build, or renovate could deduct interest paid on their home equity debt. With the new tax plan, however, home equity deduction has been eliminated. 5. Moving Expenses
With the exception of military members, moving expenses for work-related relocations are no longer tax deductible.
6. Deduction for State and Local Taxes The bill allows an itemized deduction of up to $10,000 for total state and local property taxes and income or sales taxes. The bill also specifically prevents the deduction of 2018 state and local income taxes prepaid in 2017. 7. Standard Deduction Adjustment
The bill provides a new standard deduction of $12,000 for single individuals and $24,000 for joint tax returns. By increasing the standard deduction, tax incentives for mortgage interest and property tax deductions has been greatly reduced.
8. Tax Rate Changes
For specific questions about how these changes may affect you directly, feel free to contact us!
Special thanks to Jim Duffy - Branch Manager and Senior Mortgage Banker at Atlantic Bay Mortgage Group for the information in this post!