Tax reform and its impact on homeowners
With the new year came new tax laws—some of which impact homeowners.
While tax rates for businesses and some individuals are on the decline, Americans will have less to claim when it comes to deductions under the Tax Cuts and Jobs Act of 2017, which was formally signed into law on December 22.
How does it affect you, either as a homeowner or prospective homebuyer?
There are a few ways, starting with the mortgage interest deduction cap. That limit has dropped to $750,000 for home loans taken out after December 14, 2017. Loans of up to $1 million secured before that date are grandfathered and not subject to the new cap.
The cap for mortgage interest deduction for second homes also dropped from $1 million to $750,000.
Interest paid on amounts up to $100,000 in home equity loan debt, previously capped at $100,000, is no longer deductible unless the proceeds are used to substantially improve the property.
The new law also impacts state and local deductions. While the previous law allowed for unlimited deductions, the total of income, sales and property deductions is now capped at $10,000. If you live in a high-tax area, this could have a significant impact on what you will owe.
If you have specific questions about the new law and its impact, reach out to a tax advisor.
Source: USA Today
Guaranteed Rate does not provide tax advice. Please contact your tax advisor for any tax-related questions.