Tax season is here, and with the recent changes from the Trump tax overhaul, there’s been a lot of confusion about what it means for home buyers and owners. We’ve heard some misconceptions floating around, and we thought it’s a good time to update you on just a few of the key changes that will affect a lot of us.
Mortgage Interest Deductions
One of the biggest misconceptions is that the tax deduction for mortgage interest is gone. It’s not. If you bought your home before December 15, 2017, you can still deduct all of the interest on loans of up to $1 million. If you bought after that, or are considering a purchase now, you should be aware that you’re still able to claim a deduction in the future, but it will be capped at $750,000.
Home Equity Interest Deductions
In the past, you could deduct the interest from a home equity line of credit (HELOC) regardless of what the money was used for. After the changes, next year you won’t be able to unless it’s used for a “substantial home improvement.” Also keep in mind that next year, your total combined mortgage and eligible home equity interest has to be under the $750,000 cap.
Through last year, you could deduct part of your moving expenses, but only if you were relocating for a new job at least 50 miles farther from your former home than your old job. As of 2018, there’s no longer a deduction for moving expenses of any kind (unless you’re active duty military).
Property Tax Deductions
You may have already heard about the new cap on property tax deductions, but there’s still been a lot of confusion around it. Bottom line, homeowners can still deduct these taxes, but with a new cap of $10,000 per year.
So property tax and mortgage interest deductions are not gone, but the standard deduction that anyone can take nearly doubles next year to $12,000 for single filers, and $24,000 for joint filers. So many people may choose not to itemize their deductions if their taxes and mortgage interest don’t exceed the new higher bar for the standard deduction.
If you have questions about your taxes for last year or moving forward, it’s always best to consult an accountant or tax professional directly. And your REALTOR is here for you to assist with any of your questions about home ownership and its tax benefits, or your what you should know for your next purchase! Contact us regarding your real estate needs today!