The New Home Tax Law You Won’t Like + 4 More

Below the top 5 new laws or revisions of laws that will either save or cost you money. One of them I am not a fan for reasons I indicate below.

These laws will affect home ownership(mortgage interest and property taxes), home selling and moving.

Some of the laws for individuals and families will expire at the end of 2025.

1. Mortgage interest deduction

The mortgage interest tax deduction makes owning a primary home more affordable. It cuts down on the federal income tax that qualifying home owners pay by reducing their taxable income by the amount of mortgage interest they pay.

Right now in 2018, the deduction is scaled back to interest on debt up to $750,000, instead of $1 million, for people who bought homes on or after Dec. 15, 2017.

Homes bought Dec. 15, 2017, or later, you may deduct the interest you pay on mortgage debt up to $750,000($375,000 if married filing separately).

The law carves out an exception for people who were under contract to buy a home before Dec. 15, 2017, as long as they were scheduled to close by Jan. 1, 2018.

Another exception: When you refinance a mortgage, the compromise bill treats the new loan as if it were originated on the old loan’s date. That means the old limit of $1 million would apply.

2. Property tax deduction

The former tax law eased the pain of paying property taxes by allowing qualifying taxpayers to reduce their taxable income by the total amount of property taxes they paid.

For 2018, the deduction is limited to a total of $10,000 for the cost of property taxes, and state and local income taxes or sales taxes.

This means you may deduct up to $10,000 ($5,000 if married filing separately) for a combination of property taxes and either state and local income taxes or sales taxes.

3. Home equity deduction- The One I Don’t Like

On top of the mortgage interest deduction, the former tax law added a deduction for interest paid on home equity debt “for reasons other than to buy, build, or substantially improve your home.”

So, for example until this year, if you borrowed from a home equity line of credit to pay your parents medical bills, or your daughter’s college tuition, the interestyou paid prior to 2018 was tax-deductible.

For 2018, the deduction is eliminated for interest paid on home equity debt.

4. Mortgage interest deduction for second homes

You may deduct interest on mortgage debt on your primary home and a second home.

The new law keeps this part of the former tax law in place, although it reduces the amount of eligible mortgage debt up to $750,000($375,000 if married filing separately)…it used to be $1 Million and $500K if married separately.

5. Moving expenses

Under the former tax law, you could deduct some moving expenses when you moved for a new job. You had to meet complex criteria involving distance and timing of the move.

Beginning in 2018, only active-duty members of the armed forces will be allowed to deduct moving expenses.

Tax law through 2017Tax law beginning in 2018Moving expensesDeduct some moving expenses if you meet distance and time requirements. At least our active duty members of the armed forces can deduct moving expenses.

PS…Thank Goodness!!! The Capital Gain Rule is Unchanged

When you sell a house, the capital gain is the difference between the price you paid for it and the price you sold it for. This capital gain is treated as taxable income.

If you owned the house and lived in it for 2 out of the past 5 years, then you’re allowed to exclude up to $500,000 of this capital gain as income so you don’t have to pay federal income tax on it. (The exclusion is capped at $250,000 for married taxpayers filing separately.) So again, this law is unchanged. Great news for many of my clients!

Whether you end up paying less tax or more tax depends on a wide range of factors beyond the homeownership-related deductions and exclusions discussed here. Every taxpayer is different.

Success Stories

‘He has been there anytime I needed him and I know if I need him again he would be there too. Brad gave 100% from the first time he called me till the sale was done.’

-Jim V.

‘We really felt like Brad was on our side throughout the transaction and knew how to navigate the process calmly and effectively’

-Curt and Kim C

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-Scott & Allison T.

‘Thanks to Brad Brinkman and his team we now have a beautiful new home and a great investment into our future.’

-Ryan & Amanda F.

‘He found my house for me when others could not, in a location that I thought would be impossible. His aggressiveness has given me the opportunity to live in a fantastic place.’

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‘You made it easy for us to make this move into our new home because you took on all the worries, handling our transaction with skill and expertise. Specifically we were impressed with your approach to business, treating each and every customer as you treated us; as though we were your most important clients’

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‘He made each transaction very smooth and it was great peace of mind knowing I could count on him.’

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