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Implications of the Tax Reforms for Homeowners

FeaturePics-Preparing-Taxes-151015-1070606As the new tax bill has made its way through the House and Senate, current and potential homeowners have been wondering: how will this law affect me and my family in the immediate future? Read on for some of the basic short-term implications of the changes to the tax code.

Mortgage Interest Deduction
: the revised tax law sets a total cap of $750,000, ($250,000 less than the 2017 tax code allows) for both primary and secondary residences. This will not apply for already established mortgages, but only for new mortgages. Existing home loans will retain the current $1 million mortgage interest deduction limit.

Capital Gains Exemption:
for the sale of a primary home, there is now the exemption of gains of up to $250,000 for single filers and $500,000 for joint filers. This is applicable if homeowners lived in the homes for two of the last five years.

State and Local Tax Deduction:
deductions were expanded beyond property taxes to include income tax. However, the total was capped at $10,000. Practically speaking, in a higher-tax state like NY, that likely means you’ll pay more. This change will expire after 2025.

Standard Tax Deduction: The bill roughly doubles 2017’s standard deduction, so in all probability, many more people will end up taking it instead of itemizing the deductions. If you currently itemize, you may want to consider whether this is still the best plan for you. This change would expire after 2025.

The tax law will go into effect for the 2018 tax year, meaning that the provisions take effect on January 1, 2018. Those provisions will typically affect your 2018 tax return, not your 2017 tax return that you’ll file beginning in 2018. You could see changes to your witholdings from your paycheck as early as January.

For further reading on the impact the bill may have on you as a homeowner:
Take this interactive survey.
Read this article about the impact on 8 American families.