HOMEOWNERS: Here is what’s in the New Tax Bill For You
- If you purchased a home before December 16, 2017, you will be allowed an itemized deduction for the mortgage interest you pay up to $1 million.
- For purchases after that date, that cap is lowered to $750,000.
- Refinancing of “grandfathered mortgages”, that were acquired prior to 12/16/17 can retain the deduction limits, but not beyond the original mortgage’s term/amount (some exceptions apply for “balloon payment” mortgages).
- An itemized deduction can be made for a principal and second residence mortgage up to combined total of $750,000 (or up to $1 million if grandfathered prior to 12/16/17).
- This means that the interest you pay on your loan for a 2nd home, if these loan limits are exceeded will not be deductible in 2018.
- However, if you rent your vaction home, you can write off the costs associated with that activity, which would include a portion of mortgage interest and property taxes.
- Interst paid on home-equity loans will no longer be deductible beginning in 2018. Therefore, 2017 will be the last year for a while to be able to deduct this interest.
- However Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to acquire or substaintially improve the residence and can be documented.
Exclusion of Gain on Sale of a Principal Residence
- The final bill retains current law. Therefore, 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.
- Note: The tax bill also specifically precludes the deduction of 2018 state and local income taxes prepaid in 2017.
Mortgage Credit Certificates (MCCs)
The final bill retains current law.
This material is for informational purposes only. This material doe not provide individual tailored investment advice or offer legal, tax, regulatory or accounting advice. We recommend you contact your financial planner or tax advisor for details and more information.