The new tax bill signed passed by Congress in late December of 2017 makes some changes to the Internal Revenue Code.
Some of the tax law changes have already taken place and will continue through 2018.
You can find out more here from the Wall St. Journal.
Of course, please do contact your tax advisor or CPA to talk about the specifics of how the tax laws apply to you and your circumstances.
As a homeowner or potential home buyer, here are some highlights of the changes:
If you purchased a house prior to December 16, 2017, you will be allowed an itemized deduction for the mortgage interest you pay up to $1 million.
For purchases after December 16, 2017, that amount has been lowered to $750,000.
Refinancing of mortgages that were acquired prior to December 16, 2017, can retain the deduction limits, but not beyond the original mortgage’s term and amount.
An itemized deduction can be made for both a principal and second residence mortgage up to a combined total of $750,000 (or up to $1 million if grandfathered prior to December 16, 2017).
So, the interest you pay on your loan for a second home, only if the above loan limits are exceeded, will not be deductible in 2018.
If, however, you rent your vacation home, you can write off the costs associated with that activity, which would include a portion of mortgage interest and property taxes.
Exception: interest may be deductible on home equity loans (or second mortgages) if the proceeds are used to acquire or substantially improve the residence and can be documented.
Exclusion of Gain on Sale of a Principal Residence
There are no changes to current tax law. Taxpayers will continue to be able to exclude up to $500,000 ($250,000 for single filers) from capital gains taxation when they sell their home, as long as they have lived there for two of the previous five years.
Property, state and local income taxes face a combined $10,000 deduction limit.
If you are thinking of purchasing a home today, you may be wondering what these tax law changes mean for your future purchasing plans. There are always multiple factors to consider when you are looking to make that decision.
Purchasing a home is still a fantastic investment opportunity and gives you the best chance of building long-term wealth.
It would be my pleasure to help you determine if now is the time to purchase. Do contact me for more information!
This information does not provide customized investment advice or offer legal, tax, regulatory or accounting guidance. Please contact your CPA or tax advisor for details and more information.