Recently, Republicans released the final version of their tax bill. The Tax Bill would cut taxes for corporations and also cut taxes for a large part of American taxpayers as well. This could result in changes and restrictions for current and future homeowners.
An article in money.cnn.com provides a brief explanation of what the changes could mean for homeowners, highlights of which are outlined below.
1) Downsized mortgage interest deduction:
Down from the current $1 million threshold, under the tax bill, new homeowners would be able to deduct interest on the first $750,000 of a mortgage on a newly purchased home. The deduction would help make home buying for some homeowners more affordable. However, the lower limit makes it harder for homeowners looking in cities where the housing market is more expensive. This causes experts to worry that current homeowners will hold back from selling their homes, thus causing harm to the already short supply of housing.
2) Less reason to itemize:
In order to claim the mortgage interest deduction, homeowners must itemize their taxes. Since the new tax bill would nearly double the standard deduction, fewer Americans are expected to itemize when April rolls around.
3) Limit on property tax deduction:
Taxpayers will no longer be able to fully deduct state and local property taxes plus income or sales taxes. The bill will instead allow individuals to deduct up to $10,000 in either state and local income and property taxes OR state and local property and sales taxes.
This could affect homeowners in high-tax states and create an increase in what they owe.
4) Tax break stays from home sellers:
If selling a primary home that has been lived in for the past two out of five years, taxpayers will still be able to exclude up to $500,000 from capital gain.
There are probably numerous planning techniques, loopholes, and technical corrections that will come to light as the months progress and I will continue to monitor all of these and share them with you. Right now, the best thing to do is to book time with a tax specialist to fully understand what the impact of this bill will be specifically to your circumstances.
For more information and to read the full article on CNN Money, click here.