Tax Reform 2017: 7 Facts About the Senate Tax Bill Home Buyers and Sellers Need to Know
On December 20, 2017, the final version of a $1.5 trillion tax reform bill was passed in our nation’s capital. There have been countless stories published, along with many differing opinions as to whether this bill—which has now been signed into law by President Trump—is a “good” thing or a “bad” thing.
As a company that focuses on home loans, we want to help buyers, sellers, and anyone who owns property, understand portions of the tax bill that may affect them. Our goal isn’t to push any kind of political agenda—we’re sticking to just the facts.
How the 2017 Tax Reform Bill Impacts Mortgages, Property Taxes, and Deductions
Wondering how the Senate tax bill could change the way you do your taxes? Here are some things to be aware of if you own property in the U.S., or you’re thinking about buying in the future:
1. Mortgage deductions: For homes purchased between January 1, 2018 and December 31, 2025, the new cap for deducting mortgage interest is $750,000, instead of $1 million. After December 31, 2025, the cap reverts back to $1 million.
2. Standard deductions: Standard deductions for singles and married couples filing jointly have nearly doubled, which may encourage more people to take the standard deductions versus itemizing their deductions.
3. State and local property taxes: The property tax deduction is now limited to $10,000 total.
4. Home equity loans: You will be able to keep deducting interest on home equity loans up to $100,000, but only if that loan is actually being used for home improvement (as opposed to consolidating debt or paying for a large purchase, which is what many people use this money for).
5. Capital gains exclusion: If you’re selling a home, you can exclude up to $500,000 for joint filers or $250,000 for single filers for capital gains when selling a primary home—as long as you lived in the home for two of the past five years.
6. Moving expenses: In the past, you’ve been able to deduct reasonable moving expenses if your job has moved, or if you’ve moved to start a new job or business. Under the tax reform bill, you will no longer be able to deduct those moving expenses.
7. Casualty loss deduction: If your property is damaged by some type of disaster, you will only be able to deduct the losses if the event is a presidentially declared disaster.
Although these changes take effect at the beginning of 2018, they won’t impact you when you file your 2017 taxes next year. You will deal with the different deductions when you file your 2018 taxes at the beginning of 2019.
Contact Embrace Home Loans if you have any questions about how the new tax laws may affect you, or if you’d like to refinance or buy a new home.