Mortgage Myth: “The new tax law is going to impact the value of homeownership. Owning a home won’t provide the same tax benefits.”
The new Tax Cuts and Jobs Act is bringing plenty of changes for homeowners. However, the rumor that these changes will take away the tax benefits of being a homeowner are not true. There are still plenty of benefits, but some of the rules have changed.
Changes Are Coming
News of the Tax Cuts and Jobs Act (TCJA), passed by Congress at the end of December, is making waves. Many are confused and concerned about the widespread impact of these changes and how it will affect their personal finances. Homeowners have a lot of questions about how the new laws will impact taxes on what is typically their biggest asset.
The good news? These changes do not impact the current filing season. However, now that 2018 is upon us, it’s important be prepared and learn how these news laws will impact what you owe next year.
Impact on Homeowners
Take a closer look at the ways that the TCJA could impact homeowners’ taxes for the 2018 fiscal year:
Mortgage Interest Deductions
Deducting mortgage interest payments is one of the biggest tax incentives to owning a home. When homeowners make these deductions, their federal income tax is cut by reducing their taxable income by the amount of mortgage interest paid. Mortgage interest can still be deducted under the new laws, with some adjustments.
Before: Interest could be deducted up to $1 million (or $500,000 if married, filing separately) on your primary home and second home.
After: For homes bought after December 15, 2017, interest can be deducted up to $750,000 ($375,000 if married, filing separately) on your primary home and second home.
Property Tax Deductions
Property taxes are a popular deduction for homeowners because they allow homeowners to reduce their taxable income by the total amount of property taxes paid. Deducting property taxes will now be quite different under the new tax law.
Before: Property taxes you paid could be deducted on your real estate.
After: Property taxes can be deducted up to $10,000 ($5,000 if married, filing separately). This is for a combination of property taxes and either state and local income taxes or sales taxes.
For those relocating due to a new career opportunity, moving expenses were a popular deduction. Moving expense deductions have now changed under the new tax laws.
Before: Some moving expenses could be deducted, based on distance and other requirements.
After: Now, only active duty members of the military qualify for moving expense deductions.
Please note, this information is not a substitute for personal tax advice. Always consult with a professional tax advisor. There is always the possibility that the new laws could be amended or changed within the next calendar year. For up-to-date information, please visit: IRS.gov.
If you have more questions about how this may directly impact your home financing or your ability to become a homeowner, feel free to give us a call and speak with one of our experienced Senior Mortgage Bankers. Give us a call today!