What You Should Know About The Tax Reform Bill

The Tax Reform Bill that was passed in December has a direct effect on property owners, and I am here to help you understand what these new rules and regulations mean for you! If you’re interested in reading through the entire tax reform article written by the National Association of Realtors, it’s linked HERE, but below is a summary of the tax changes to be aware of:

  • Home Mortgage Interest Deduction – The final bill retained the mortgage interest deduction on mortgages, but limited the mortgage debt to $750,000 for new loans (previously-secured loans up to $1 million are grandfathered in). The mortgage interest deduction for second homes follows the same rules.
  • Home Equity Debt Interest and Second Mortgages – The bill repealed the deduction for interest on home equity debt but not if the loan was used to substantially improve the residence.
  • Property Tax Limits – For those who itemize their taxes, a deduction of up to $10,000 for the total of state and local property taxes and income or sales tax will be allowed.
  • Capital Gains on Home Sale – Although this was looked at closely, the final bill kept the current law in place, allowing for no capital gains tax on primary residence with gains of $250,000 for singles and $500,000 for married filing jointly so long as the homeowners lived in the home two of the last five years before selling.
  • 1031 Exchanges – For those people with investment property, the bill retains the 1031 Exchange rules for exchanging real estate to avoid capital gains tax.

There are also some additional changes to items such as moving expenses and the historic tax credit that may have an affect on your taxes this year. If any of these changes apply to you, take a look at the full article linked above, talk with your accountant, or let me know if you have any questions!

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