Tax Changes Impact Homeowners
Whether you are an existing homeowner or a soon-to-be homeowner, you should fully understand how the new 2018 tax laws will affect your current home, or your home purchase, and how it may limit your ability to write off interest and taxes on your future tax returns.
The key components that one should understand are as follows:
- If you own a home today and have a mortgage loan of more than $750,000, you can deduct your interest expense without limitation. If you have a second home, you can write off that interest without limitation as well. However, beginning in 2018, if you obtain a new loan or buy a new residence (or second home), you will only be able to write off home mortgage interest on loans up to $750,000 total. If you have a second home, the two mortgages would be combined for your total.
- In the past, if you had Property Taxes on your current home of $12,000 per year, you could deduct the entire tax bill. If you had State Income Taxes of $10,000 per year, you could deduct this amount from your Federal Taxes as well. Additionally, if you had a vacation home with another $6,000 in annual taxes, this was also deductible, meaning you could deduct the entire amount (in this example $28,000) on your Federal Taxes. Moving forward in 2018, that deduction will now be capped at $10,000 total for all Property and State Income Tax.
There are many variables that go into tax law and ultimately you should inquire with your tax accountant to get a more personalized assessment of your own situation.
You can also read a good article from MONEY Magazine about the new tax law Here.