Today I’m going to talk about how the recent tax bill has affected homeowners in our real estate market. There are a lot of changes in there that will affect a lot of Americans.
Many of them are over my head, so you should definitely talk with your tax professional or CPA before making a decision on anything. However, here are four changes brought on by the tax bill that can and will affect homeowners:
1. Reduced mortgage interest rate deduction. New homebuyers can now only deduct mortgage interest from the first $750,000 of their loan. The limit used to be $1 million. This change won’t affect a lot of people locally, but it could have a major impact in pricier markets like L.A., New York, and San Francisco.
2. Fewer reasons to itemize. In order to claim the mortgage interest rate deduction on their taxes, homeowners will have to itemize them. However, the new tax bill calls for a near-doubling of the standard deduction and far fewer people are expected to itemize their taxes this year.
3. Limits on property tax deductions. Individuals are now permitted to deduct up to $10,000 of their property taxes, which is down from a higher figure. Again, this change won’t affect many in our market, but it will have an effect in bigger markets across the country.
4. The capital gains relief for home sellers remains intact. There was a proposal to remove the capital gains exclusion in a previous version of the bill, but it was ultimately left in. You can still exclude $250,000 of capital gains on the sale of your home if you’re single and $500,000 if you’re married, provided that you have lived in the home as a primary residence for two of the last five years.
If you have any questions for me about these changes or how they might affect you, feel free to reach out and give me a call or send me an email. I look forward to hearing from you soon.