1. MORTGAGE INTEREST DEDUCTION
There was concern that the mortgage interest deduction (MID) would be eliminated. That didn’t happen.
However, the bill has made the following changes:
- Reduces limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17 (from the existing $1,000,000). Current loans up to $1 million are grandfathered.
- Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount refinanced.
- Repeals deduction for interest paid on home equity debt through 12/31/25.
- Interest is still deductible on home equity loans if proceeds are used to substantially improve the residence.
- Interest remains deductible on second homes, but subject to the limits.
2. STATE AND LOCAL TAXES (SALT)
There was concern that the state and local tax deduction (which includes property taxes) would be eliminated. That didn’t happen.
The final bill allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes.
3. EXCLUSION OF GAIN ON SALE OF A PRINCIPAL RESIDENCE
There was concern that owners would now need to live in their house for at least 5 out of the last 8 years to claim this exemption. Under the former tax framework, a typical owner, who has lived in their house for at least 2 years out of the last 5 years, would pay nothing in capital gain taxes if they sell the house.
No change. The new code will remain the same as the old.
FINAL PROPOSAL put up for vote by the Conference Committee Tax Cuts and Jobs Act
FURTHER TAX INFORMATION – H.R. 1 The Tax Cuts and Jobs Act
BEVERLY TATE, REALTOR
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SOURCE: Keeping Current Matters
**Disclaimer #1: This page is not meant to be a resource for tax advice but instead a resource for basic information concerning the aspects of the new tax code and how it may impact the real estate market. Our views herein provide broad guidance to the industry. The specific impact on each individual and property will vary. Therefore, clients and customers should get tax advice from their accountants or financial advisors who will explain how the entire tax code will affect their personal returns.
**Disclaimer #2: Some of the commentary on this page may be revised as the analysis of the bill and future law evolves. As further clarification of the new code and deeper analysis becomes available, we will update this page.
**The President just signed the bill into law.