Breaking Down How the New Tax Bill Impacts Homeownership
What is with these new tax laws? Are you wondering how they affect you or if they do? We asked the ladies over at Team Trimble to help us out!
With the most significant tax overhaul in more than 30 years passing late in 2017, lots of folks have been wondering how the new law will impact home ownership. Since it’s been at the top of everyone’s mind, we’re sharing highlights of the new law. But remember it doesn’t affect tax filings for 2017.
Income Tax Brackets: The new law retains seven brackets with slightly lower tax rates than previous ones.
Standard Deductions: The standard deduction has been increased to $12,000 for single filers and $24,000 for joint filers.
Primary Residence Mortgage Interest: Homeowners who live in a home that was purchased on or before Dec. 14, 2017, are grandfathered and will maintain their $1 million mortgage interest deduction threshold. For primary residences purchased after Dec. 14, 2017, the limit for mortgage interest deduction drops from $1 million to $750,000. This change will specifically impact buyers in markets with above-average home prices. Homeowners living in less-expensive housing markets may choose not to itemize and take the new standard deduction.
State and Local Tax Deductions: Limits have now been put in place, as homeowners may only 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. Because of this, homeowners in high property tax areas may find that a portion of their tax bill is no longer be deductible.
Capital Gains: The capital gains exclusion remains at $250,000 if filing single and up to $500,000 if married and filing jointly – if the homeowner has lived in their home for 2 of the past 5 years. A change to the qualifying timeframe was proposed at 5 of the last 8 years, but this change was voted down in the end.
Mortgage Refinancing Primary Residence: Homeowners may deduct their mortgage interest up to $1 million 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.
Mortgage Refinancing 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: The new bill repeals the deduction for home equity loan or line of credit interest. Previously, interest paid was deductible for debt up to $50,000 for single filers and $100,000 for married filing jointly. However, interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence. If the loan dollars are used to pay off credit cards or other living expenses, then a deduction can no longer be taken.
Moving Expenses: The deduction for moving expenses has now been eliminated, except if you are a member of the military.
We hope this information helps to provide some clarity around the new tax bill. We’re sharing it purely for a general understanding and we recommend you talk to a tax professional for specific guidance or counsel. If you’d like more information, we also encourage you to visit the IRS website at https://www.irs.gov/newsroom/tax-reform where the bill is outlined and many examples/scenarios are provided.
Team Trimble is a full service real estate firm specializing in Lake Country. We’re your local expert and happy to answer any questions you may have about buying or selling real estate. Contact us at 262.271.3621 or teamtrimble@kw.com
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Team Trimble Ladies
We are Team Trimble, a real estate firm specializing in Lake Country. We all love and live in Lake Country – this is where we’ve raised our families, served in the schools, volunteered for charities, and where we’ve been active members of the community for many, many years. We joined together as a team with a common purpose of helping our family, friends, neighbors, and colleagues with their home buying and selling needs, as well as to share the homes of this great area with those looking to join our community. Website / Facebook
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